The Karnataka Appellate Authority of Advance Ruling (AAAR) in the case of M/s Macro media Digital Imaging Pvt. Ltd. setting aside the ruling of AAR has held that printing and supply of trade advertisements is supply of goods and exigible to GST @ 12%.
Facts of the case:
- The applicant, M/s Macro media Digital Imaging Pvt. Ltd. is engaged in the business of printing of trade advertising material like Billboards, Building Wraps, Fleet Graphics, Window Graphics, Trade Show Graphics, Office Branding, In-store Branding, Banners, Free Standing Display Units and Signage Graphics, for which required raw materials such as poly vinyl, flex, paper, cloth printing inks etc., are procured by themselves.
- The design and graphics are provided by the customers themselves. The Appellant merely undertakes the activity of printing on the material.
- The charges for supply of trade advertisement is based on square feet of product supplied
Issue on which ruling from AAR was sought:
(i) Whether the transaction of printing of content provided by the customer, on Poly Vinyl Chloride (PVC) banners and supply of such printed trade advertisement material is supply of goods.
(ii) What is the classification of such trade advertisement material if the transaction is supply of goods.
(iii) What is the classification and applicable rate of CGST on the supply of such trade advertisement material if the transaction is that of supply of service.
Ruling by AAR:
It was decided by by the Karnataka AAR vide Ruling dated 17th Feb,2020 considering Para 4 of CBIC Circular No. 11/11/2017-GST dated 20.10.2017 that:
- The transaction of printing of content provided by the customer, on Poly Vinyl Chloride (PVC) banners and supply of such printed trade advertisement material is supply of service. The classification of aforesaid supply of service is 9989 of the scheme of classification of services.
- Further the rate of GST on supply of aforesaid service is 18% up to 30.10.2017 and 12% effective from 31.10.2017, as per Entry No, 27 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017, as amended.
Aggrieved by said ruling of the AAR the Appellant has filed an appeal before AAAR wherein it was contended that instant supply is supply of goods.
Order of AAAR – Deliberations and Ruling:
- In our opinion Circular No. 11/11/2017-GST dated 20.10.2017 will not be applicable to the case of the Appellant since the contract given by customers is not a printing contract.
- The printing activity undertaken by the Appellant is for purpose of bringing into distinct item i.e. trade advertisement used by customer for advertising of their product / services.
- The charges for supply of trade advertisement is based on square feet of product supplied. This evidences that what is supplied by the Appellant is in nature of goods and not a services.
- Printing by the appellant is ancillary to main activity of making advertisement material.
In view of above deliberations the two member bench of D.P. Nagendra Kumar and M.S. Srikar set aside the ruling of the lower authority and held that the transaction of printing of content provided by the customer, on Poly Vinyl Chloride (PVC) banners gives rise to a distinct trade advertisement material and thus supply of such printed trade advertisement material is supply of goods.
The AAAR further ruled that the trade advertisements printed and supplied by the appellant is classifiable under Chapter Heading 491110 of the Customs Tariff Act and attracts GST rate of 12% in case of inter-state supplies and 6% CGST and 6% SGST in case of Intra state supplies vide SI.No 132 of Schedule II to Notification No. 1/2017-IT (Rate) & 1/2017-CT (Rate) both dated 28.06.2017 respectively.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
