Printing and supply of textbooks to the Government department are taxable under GST

The West Bengal, AAR in the case of Swapna Printing Works (P.) Ltd. In re [Order Number 28/WBAAR/2023-24 dated December 20, 2023], held that the printing and supply of textbooks and notebooks to Jharkhand Council of Educational Research and Training, Ranchi ("JCERT") would be treated as a supply of goods as would not qualify as pure services because Entry 3 of Notification No. 12/2017 Central Tax (Rate) dated June 28, 2017("the Exemption Notification"), denotes that supply of services which does not involve any supply of goods can be regarded as pure services. Further, the Printing and supply of 'Bilingual Parental Calendar' to JEPC and supply of a Comprehensive Report Progress Card to the Education Department, Government of Assam would be treated as supply of services because it was considered a composite supply where printing services were the principal component. Lastly, the ruling clarified that the supplies did not qualify for exemption under Serial Number 3 or 3A of the Exemption Notification as the nature of the supplies involved both goods and services.

Facts

M/s. Swapna Printing Works (P.) Ltd. ("the Applicant") was engaged in the business of printing books and other items. The JCERT had entered into a contract with the Appellant for printing and supply of text books under State Plan for academic session 2023-24 on the basis of the content provided by the JCERT. As per the contract, the Applicant had temporary copyright over the content of the text books against consideration to be paid in the form of royalty. The Applicant received contracts for the printing and supply of Notebooks under the School Kit Scheme of the State Government for 2023-24, the printing and supply of a Bilingual Parental Calendar from JEPC, and the printing and supply of Pupils' Comprehensive Report Progress Card by the Office of the Mission Director, Axom Sarba Siksha Abhiyan Mission, Assam.

The Applicant filed an application i.e., FORM GST ARA-01 for advance ruling under Sub Section (1) of section 97 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") on whether the items supplied by the Applicant will be considered as supply of goods or services under Circular No.11/11/2017-GST dated October 20, 2017 ("the Circular") andwhether the printing activities undertaken by them are eligible for exemption under Serial Number 3, 3A of the Exemption Notification as amended.

Issue

Whether the items supplied to Government Schools be considered a supply of goods or services and also the printing activities undertaken eligible for exemption under GST?

Held

The West Bengal, AAR in Order Number 28/WBAAR/2023-24 held as under:

• Observed that, the essence of the contract lies on the transfer of temporary copyright and not solely on the process of printing and delivering of books to JCERT. Entry 5(c) of Schedule II which classifies 'temporary transfer or permitting the use or enjoyment of any intellectual property right' as supply of services, is applicable in this case. Thus, the agreement between the Applicant and JCERT involves two distinct supplies out of which, the Applicant is liable to pay tax under reverse charge mechanism in respect of supplies made by JCERT for temporary transfer of copyright.
• Observed that, the Applicant has also drawn attention to clarification given in para 4 of the Circular which states that in the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services. Hence, the person who owns the copyright and the person who prints are separate persons. However, by virtue of temporary transfer of copyright by JCERT against payment of royalty which enables the Applicant to supply books on his own account where the Applicant plays the role of copyright holder as well as the printer. Therefore, the activities being undertaken by the Applicant cannot be classified in the manner as clarified in para 4 of Circular.
• Further, the Applicant is printing books using the inputs purchased by the Applicant and subsequent delivery of the same as involved in the instant case cannot be treated as supply of services on the ground that the Applicant, for the stipulated period under the contract, also holds the copyright of the contents of the books. Thus, the instant supply is to be treated as a supply of goods being printed books.
• Noted that, the JEPC provides the content for printing the Bilingual Parental Calendar to the Applicant using the paper and ink purchased by the Applicant. Thereafter, supplies the calendar to the recipient. Thus, the supply is a composite supply where the predominant element is the printing of the calendar. The supply of the printing material is only ancillary to the main supply. Thus, the same is classifiable under Tariff Code 998912 being Printing and reproduction services of recorded media, on a fee or contract basis.
• Relied on, the advance ruling given by the Telangana Authority for Advance Ruling in the case of M/s. Y S Hitech Secure Print Private Limited [TSAAR Order No.08/2023 dated April 12, 2023] and submitted to consider the supply to Assam Government as exempt from payment of GST as per Serial Number 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. The aforesaid entry exempts services provided to an educational institution, by way of services relating to admission to, or conduct of examination by such institution. The definition of 'educational institution' as provided under the said notification is reproduced below: "Educational Institution" means an institution providing services by way of, (i) preschool education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; (iii) education as a part of an approved vocational education course. Further, the following explanation has been inserted vide Notification No. 14/2018-Central Tax (Rate) dated July 26, 2018 for removal of doubts, it is clarified that the Central and State Educational Boards shall be treated as Educational Institutions for the limited purpose of providing services by way of conduct of examination to the students. The process of conducting the examination includes pre-examination works, the examination itself, and post-examination works and for that purpose, printing of a comprehensive report progress card may be treated as a service relating to the conduct of the examination. However, in the instant case, the supply is provided to the Education Department, Government of Assam, and not to an educational institution. Therefore, the instant supply shall not be covered under the aforesaid entry for exemption.
• Observed that, the term ‘pure services’ has not been defined under the CGST Act. However, Serial Number 3 of the Exemption Notification denotes that the supply of services which does not involve any supply of goods can be regarded as ‘pure services’. The said entry serial, therefore, specifically excludes works contract services or other composite supplies involving the supply of any goods. On the other hand, to qualify to be a supply under serial number 3A of the Exemption Notification, a composite supply, subject to fulfillment of other conditions as specified in the said entry, would be such that the maximum value of involvement of goods is less than 25% of the total value of the said composite supply. As the supplies of printed text books, notebooks, activity calendar and comprehensive progress report card involves supply of paper, ink, binding and packing materials etc., such supplies would not come under Serial Number 3 of the Exemption Notification. Further, the Applicant has not furnished any documents where the value of goods involved in the supply can be ascertained.
• Held that, (1) Printing and supply of text book to JCERT shall be treated as supply of goods. (2) Printing and supply of 'Bilingual Parental Calendar' to JEPC would be treated as supply of services. (3) Printing and supply of notebook would be treated as supply of goods. (4) Printing and supply of Comprehensive Report Progress Card to the Education Department, Government of Assam would be treated as supply of services.