It is common practice to use printed materials for advertisement purposes in businesses and trade. Such printing may involve both, goods as well as services. While it essentially involves printing, it may or not involve supply of material (e.g. cloth, paper, PVC etc) on which printing of advertisement is done. What should be the appropriate classification of such supplies and whether this transaction should be treated as goods or services on composite supply came up for ruling before Authority for Advance Ruling and later before Appellate Authority.

IN RE: M/S. MACRO MEDIA DIGITAL IMAGING PVT. LTD. [2020 (1) TMI 138 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL] , the applicant was a company, engaged in the business of printing of trade advertisement material. The applicant prints the content provided by the recipient on the base of polyvinyl chloride cloth, paper etc. The Applicant provides the printing ink and the base material.

The applicant sought advance ruling from the Authority for Advance Ruling on “whether such printing is a supply of goods or service, and the classification of the trade advertisement material if its transaction is a supply of goods.”

The Authority for Advance Ruling, therefore, vide Order dated 19.08.2019 ruled that the applicant is making a composite supply, where the service of printing is the principal supply. The goods supplied, having no use other than displaying the printed matter, is ancillary to the principal supply of printing.[In Re: M/s. Macro Media Digital Imaging Pvt. Ltd. - 2019 (8) TMI 1156 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL].

Being aggrieved with the above ruling, assessee preferred an appeal u/s 100 of CGST Act, 2017 before AAAR, (West Bengal).

The grounds of appeal were as under:

(i) The AAR did not consider Ruling of Telengana AAR in the matter of TSAAR/4/2018 dated 30.05.2018 IN RE: M/s. Macro Media Digital Imaging Private Limited - 2018 (6) TMI 519 - AUTHORITY FOR ADVANCE RULING HYDERABAD TELANGANA where the Telengana AAR opined that the supply of printed trade advertisement is to be treated as supply of goods.

(ii) AAR did not determine whether the transaction was a supply of goods. The printed trade advertisement being movable property falls under the ambit of ‘goods’ under section 2(52) of the GST Act.

(iii) Once the Board has clarified that printing on other synthetic media qualifies under HSN 4911, which is for goods, the present transaction cannot be held as supply of service.

(iv) Para 5 of CBIC Circular No. 11/11/2017-GST dated 20/10/2017, wherein it has been clarified that in the case predominant supply is that of goods and the supply would constitute supply of goods.

(v) The subject supply would qualify as goods under “Trade advertisement material, commercial catalogue and the like” under subheading 4911 10.

The Department submitted that the PVC material supplied to the customer is of no use unless it has the content printed on it.

The AAAR observed that the Appellant prints the content provided by the recipient on the base of PVC, paper, etc., where it provides both the printing ink and the base material. There cannot be any doubt that the content that is printed on the base material is owned by the customers of the Appellant only and the Appellant has no right of usage on the content. The Appellant produced at the time of hearing a few samples of their products, for example, advertising materials for “Hero Glamour” motorbikes, “Hyundai Venue” car, “Vivel Cool Mint” soap and “Brides India”. The said advertisement materials carry specific messages meant for customers and the contents are very specific to the product for which the advertisements are made. The advertisement meant for Hyundai cannot be used by Hero or any other company. Thus the content is exclusively the property of the client who entrusts the job to the Appellant and ‘the usage right of the content remains with the client or the Appellant. However this is not the case described under paragraph 5 of the (Circular No. 11/11/2017-GST. Thus, in our considered opinion, in the instant case, which is a composite supply. supply of service is predominant and the case or the Appellant is more akin to the case represented in paragraph 4 of Circular No. 11/11/2017- GST dated 20.10.2017.

The Appellant argued that the product description in their invoice is mentioned as “Printing and Supply of Trade Advertisement Material – HSN # 4911”, because what they supply are primarily goods - it is clear beyond doubt that what the Appellant supplies is nothing but service. Hence, there is no basis in the argument of the Appellant that it supplies goods only.

The Authority further noted that Circular No. 11/11/2017-GST dated 20.10.2017 clarifies the issue clearly. It is a fact that both the Appellant and the WBAAR have taken recourse to the said Circular to reach opposite conclusions. On careful reading of the said paragraphs, it was seen that the only difference between the two paragraphs is that under paragraph 4, the usage right is owned by the supplier of the content, whereas in the case described under paragraph 5, no such usage right is owned by the supplier of the design or logo.

On reading paragraphs 4 and 5 of Circular No. 11/11/2017-GST dated 20.10.2017, the AAAR observed that it can be concluded that items mentioned in para 4 have no secondary use other than carrying the printed content whereas the articles mentioned in para 5 have secondary usage. Though wallpaper displays designs printed or embossed on its body, it has another use that of protecting the wall. In the instant case the PVC sheet does not have any other usage other than displaying the advertisement content.

Thus, the AAAR held that the appeal fails and AAR was upheld affirming that applicant is making a composite supply, where the service of printing is the principal supply. The goods supplied, having no use other than displaying the printed matter, is ancillary to the principal supply of printing.