PRINTED LAW JOURNALS/BOOKS/PERIODICALS SOLD IN ELECTRONIC FORM OF DVDs/CDs – E – BOOK?

[Mr. M. GOVINDARAJAN]

An electronic book, also known as an e-book or eBook, is a book publication made available in digital form, consisting of text, images, or both, readable on the flat-panel display of computers or other electronic devices. Although sometimes defined as ‘an electronic version of a printed book’, some e-books exist without a printed equivalent. E-books can be read on dedicated e-reader devices, but also on any computer device that features a controllable viewing screen, including desktop computers, laptops, tablets and smart phones.  The main reasons for people buying e-books are possibly lower prices, increased comfort (as they can buy from home or on the go with mobile devices) and a larger selection of titles.

The term ‘E-book’ is defined under the Entry No. 22 of Notification No. 13/2018-Central Tax (Rate), dated 26.07.2018 which amended the Notification No.11/2017-Central Tax (Rate), dated 28.06.2017. The supply consisting only of e-book falls under Heading 9984 - Telecommunications, broadcasting and information supply services.  The explanation to this entry defines the term ‘e-book’ as an electronic version of a printed book [falling under tariff item 4901 in the First Schedule to the Customs Tariff Act, 1975] supplied online which can be read on a computer or a hand held device.  The rate of tax is 5% (CGST 2.5% + SGST 2.5%).

This issue to be discussed in this article is whether the sales of printed books, law journals etc., sold in the electronic forms for DVDs/CDs with a Dongle as a security lock with proprietary software, the updates for which are supplied online when the customer connects to internet amounts to sale of ‘e-book’ and attracts the tax rate under the Sl. No. 22 of Notification No. 13/2018-Central Tax (Rate), dated 26.07.2018 amending the Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017, with reference to decided case law.

In re ‘Venbakkam Commandur Janardhanan, (Proprietor Law Weekly Journal)’ – 2020 (5) TMI 219 – AAR, Tamil Nadu,  the applicant is engaged in supply of printed law journals and DVD’s of law journal.   The applicant sought for advance rulings before the Authority for Advance Rulings, Tamil Nadu on the following questions-

1. Whether the assessee/dealer which publishes law journals in print and sells the same content that is in books in an electronic form in DVD’s/CD’s with a software to search and read it in computers and hand held devices come under the category of E Book, so that it can avail the benefit of notification dated 26.07.2018 in respect of E-book?
2. Whether the liability on the sale of DVD/pen drive which contains printed version of law citations can be adjusted against the available ITC?
3. Whether the liability on sale of e-book of printed version of law citation can be adjusted against the available ITC?
4. Whether the balance of ITC after adjustment accrued on the purchase of paper and other material can be reversed while filing GSTR 9?

The Authority for Advance Ruling admitted the application field by the applicant.  The Authority for Advance Ruling observed that the questions at (2) and (3) relate to utilization of credit availed by the applicant and Qn. No. 4 is on reversal of credit availed, which do not fall under any of the category specified under Section 97(2) of the Act and therefore are not within the ambit of this authority.   The Authority will consider the first question and give ruling for the same.

The applicant submitted the following before the Authority for Advance Ruling-

• The applicant has 3 print journals (2 weekly and one monthly).
• The applicant y has a DVD desktop version which is supplied with DVDs and a dangle.
• First time, the DVD can be used to install proprietary software.
• Once installed the software ‘The Law weekly’ can be used to access searchable database which is valid for 1 year subscription and updates are provided weekly, when the user connects to internet. 
• The renewal is charged separately after one year without needing any more supply of DVDs etc. 
• The applicant also supplies an online view of it available on the law weekly.com with access through user id and password without any limitation on the number of devices. 
• The applicant supplies this as ‘Law Weekly Online’ and it is available for one year.
• Their books/magazines are available on electronic format to the customers through the use of their proprietary software, hence they are e-book and eligible for Notification No.13/2018 Sl. No.22(1).
• When the applicant sold DVDs/CDs and pen drives, they have levied tax at 9% CGST and 9% SGST. 

The applicant has sought ruling on whether the DVDs/CDs with software to search and read it in computers come under the category of E-book and thereby eligible to avail the benefit of Notification in respect of ‘E-book’.

The applicant submitted before the Authority for Advance Ruling the brochure, invoice, input invoices. The applicant  also submitted the  terms and conditions given as insert and screen shots of installation, screen shot of terms & conditions of above version and of the home page/main.

A copy of the application for Advance ruling filed by the applicant was forwarded to the jurisdictional Officer.  The jurisdictional Officer submitted his views on the questions raised by the applicant as below-

Qn. No. 1 – Yes, the electronic devices amount to e-book as per notification No.13 Central Tax (Rate) dated 26.07.2018.

Qn. No. 2 – Yes, the liability on the sale of DVD/ Pen drive which contains printed version of law citations can be adjusted against the available ITC.

Qn. No. 3 – Yes, the liability on the sale of e-book of printed version of law citation can be adjusted to the available ITC.  But the dealer had stated that they have availed ITC for paper and ink for printed books which are exempted. Hence, the relevant ITC should be reversed as per section 17 (2) of TNGST Act 2017.

Qn. No. 4 - Should be reversed at every month or if it is reversed while filing in GSTR & interest must be paid by the dealer.

The Authority for Advance Ruling considered the submissions made by the applicant and the jurisdictional Officer.  The Authority for Advance Ruling observed that the brochure submitted by the applicant states that the Law Weekly Desktop 1.0 is the product under consideration wherein the initial supply is made in the form of DVD/CD along with a dangle and it says that the  complete library of the Law Weekly at the fingertips’ of the customer.  The following are the features –

• Full text search on catchwords, head note & Judgments published from 1914 to date including phrase search and searches with Boolean Operators for added precision;
• search by Case Citation, Case name, Acts and Sections, Courts, range of judgment dates, Case number;
• Print out of the Original Page which can be produced before any court;
• Updates online every week.

The Authority for Advance Ruling also analyzed the operation procedure of the DVD by the customer in getting the latest updates in the concerned subject.  The Authority for Advance Ruling also observed that the applicant charged GST @ 18% on the subscription as well as renewal of the Law Weekly.   It is observed that the software gives the user option to search various Acts, case laws on Criminal Law, Cr.P.C., I.P.C., Evidence Act, etc., hitherto published in the journal. The software is updated with new content, updates of cases when connected to internet. Thus the DVD in effect contains software which requires an End User License Agreement to be accepted by the user.  The DVD is not an electronic version of the print journals. If it was an electronic version of the print journals, the DVD would have machine readable files in any format such as .doc, .txt, .pdf or any other readable files and not the executable file (setup application) which it has. The Dongle acts as a key and has some software installed on it which allows the application to be used and updates installed.

The Authority for Advance Ruling further observed that the supply of this access to the online database on their website is a supply of service classifiable under SAC 998431- On-line text based information such as on-line books, on-line newspapers and periodicals, on-line directories and mailing lists.  The e-books as per the explanation given in the notification itself are those books which are digitalized into a single machine readable file in any format such as .doc, .txt, .pdf etc., and read on a computer or a hand held device through some specific software. In the case at hand, the supply involves access to an on-line database hosted on the website of the applicant. Thus, it is evident that the above are not ‘e-books’ but supply of access to an online database online text based information [SAC 9984311 and therefore the entry at Sl. No. 22 of the Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 is not applicable to the case at hand.

The Authority for Advance Ruling ruled that the supply of DVDs/CDs with The Law Weekly Desktop’ software along with end user license and the supply of access to the on-line database on the applicant’s website are not eligible to avail the benefit of entry at Sl. No. 22 of Notification No. 13/2018-C.T.(Rate) dated 26.07.2018 notification dated 26.07.2018.