TMI Blog2020 (7) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... e - II Sl.No. 1(a) of CGST Act, 2017, it is obvious that the applicant is transferring the title in goods to his customers in the form of trade advertising material and it constitutes supply of goods only. Rate of tax - Classification of goods - HELD THAT:- The trade advertising materials is classifiable vide Notification No.1/2017 - Central Tax (Rate) dt: 28.06.2017 under S1.No.132 under HSN code 4911 and attracts tax rate of 12% - Further, the same has been clarified in detail vide the clarification issued under F.No.354/263/2017-TRU, Dt: 20th October, 2017 in Circular No.11/11/2017-GST. - AAR No.40/AP/GST/2019 - - - Dated:- 10-12-2019 - SRI. D. RAMESH, AND SRI. M. SREEKANTH, MEMBER Represented by: Sri Bipin Verma, Advocate M/s. Lakshmikumaran Sridharan Advocates 5, Link Road, Jangpura Extn., New Delhi- 110014 ORDER (Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017) 1. The present application has been filed u/s 97 of the Central Goods Services Tax Act, 2017 and AP Goods Services Tax Act, 2017 (hereinafter referred to CGST Act and APG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1. Vinyl (self-adhesive) 39199050/39199090 2. Back Lit Flex 39219026 3. Block out Flex 39219026 4. Foam Board 39206190 Modus-operandi of the Applicant 3.4 The customers desirous of getting images/ written text/trade monograms printed from the Applicant place a purchase order on the Applicant. The said purchase order spells out the type and specifications of the material on which the trade advertisement (provided by the customer) is to be printed. 3.5 The scope of work of the Applicant under any such purchase order placed by the customer is as under:- a. To procure the PVC material (blank) from an independent supplier in terms of the purchase order placed by the customer. b. The data of image/text/ trade monograms to be printed on the PVC material is received by the Applicant from the customer, via mode of pen drive/CD/cartridge. The image/ text/ trade monogram in the said CD/Pen Drive/cartrid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andhra Pradesh Works Contract 3.9 That on the transaction of supply of such trade advertisements to its customers, the Applicant was paying applicable VAT to respective State Government exchequer. However, in states where the subject transaction of printing and supply of trade advertisements was considered as works contract , the Applicant was not charging any service tax, as it is settled position of law that process of printing on PVC material (blank) to make such PVC material in form of advertisement, is an activity amounting to manufacture . Further, in terms of the Central Excise Tariff Act, 1985 (hereinafter referred to as CETA ), the traded advertisements manufactured by the Applicant were classifiable under Chapter Heading (hereinafter referred to as Heading ) 4911, under which all the products were exempt from the payment of the duty of excise as the rate of duty in column 4 of Heading 4911 was NIL The applicant had filed an application in form GST ARA-01, Dt:14.08.2019, by paying required amount of fee for seeking Advance Ruling on the following issues, as mentioned below 4. Questions raised before the Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supply of goods or not. Further, the supply will be considered as supply of service , only when the end result of supply fails the test of qualifying as goods as defined in Section 2(52) of the CGST Act. In simple words, each and every transaction, will first have to be adjudged on the touch stone of Section 2(52) of the CGST Act to determine if such transaction tantamount to supply of goods or not and it is only if the transaction fails the yardstick of Section 2(52) of the CGST Act, such transaction will qualify as service . (3) Therefore, in the instant matter the Applicant shall first proceed to determine if the transaction of printing and supply of trade advertisement to customers, is a supply of goods or not. (4) The essential condition to classify anything as goods is that it should be a movable property. Therefore, what constitutes movable property is required to be determined. However, there is no definition of the term movable property in GST law. Therefore, the definition given under the provisions of General Clauses Act, 1897 can be adopted which reads as under: (36) movable property shall mean property of every description, except im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposition further, the transactional matrix between the applicant and its customers is elaborated below. Transactional Matrix between Applicant and the customer (12) The Applicant states that purchase orders are placed by the customers on it, wherein the purchase orders clearly spell out the PVC material required by the customer, nature of the product (lit or non-lit), printing material on the PVC material and specifications of the said product. The Applicant submits that the fact that purchase orders placed on the Applicant by the customers mention such details about supply, clearly establishes that the customer intends to purchase whole trade advertisement from the Applicant and does not intend to merely get PVC material (blank) printed from the Applicant. Further, the said submission of Applicant is also substantiated by the fact that customer of the Applicant wants to advertise its products and such advertisement can only be done by the complete trade advertisement, which constitutes a single indivisible economic supply. Hence, it is submitted that the Applicant is supplying trade advertisement to the customer as a whole. (13) The Applicant submits that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communicate any message about the products of the customer and neither can a message on standalone basis, without being printed on any medium such as PVC material (blank), serve the purpose of trade advertisements by means of printed goods like billboards, banners, building wraps, etc. (17) The Hon ble Authority for Advance Ruling in the case of Re: Giriraj Renewables Private Limited, 2018 (9) TMI 1183 , tried to analyze the scope of a composite supply and held that when there are two taxable supplies-one of goods and the other of services and they both are naturally bundled and it is natural and also a practice to expect that the contractor who will supply the goods will also supply the services along with it. The relevant extract of the ruling is reproduced below: In order to understand the scope of a composite supply and also to know what may be the criteria to judge a supply as a composite supply, the CBIC has published an e-flier on the subject. As per the e-filer, Composite supply entails the concept of naturally bundled supply, and whether services are bundled in the ordinary course of business would depend upon the normal or frequent practice followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a trade advertisement, which is desired by the customer and is essentially the sole economic supply in present case. Hence, it is evident that PVC material and service of printing on PVC material, are naturally bundled and are supplied by the Notice in the ordinary course of business. (19) One of said supplies in the whole supply, should be the principal supply -To understand the true extent of the said essential, it is paramount that reference be drawn to the term principal supply , defined under Section 2(90) of the CGST Act which reads as under:- (90) principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary (20) There is no straight jacket formula to determine which is the dominant supply and which is ancillary supply. The only test to determine dominant component of supply is to have regard to the terms and conditions of contract. (21) The Applicant states that the scope of purchase orders placed by the customers has always been for supply of the trade advertisements, including both PVC material and print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and not services of printing. (25) In view of the foregoing, it is stated that in the subject transaction, supply of goods in form of trade advertisement is the principal supply and printing is ancillary , to the dominant supply of goods in form of trade advertisement. Determination if the composite supply is supply of goods or services. (26) Section 8 of the CGST Act provides for determination of tax liability on composite and mixed supply and reads as under:- 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: - (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax (27) As per Section 8, it is principal supply which should form the basis of determination of tax treatment of the composite supply . In view of the submissions made above, it is evident that in the instant transaction principal supply is that of supply of trade advertisements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entation which are not merely incidental to the primary use of the goods, then the printed plastic material will fall under Chapter 49. Thus, where the plastic article is printed with the text or material and such printing is not merely incidental to the primary use of such goods, such plastic material would be ousted from Chapter 39 and they would travel to Chapter 49 as product of printing industry. Therefore, the Applicant now refers to the goods falling under Chapter 49 to understand the classification of plastic goods with such printed material which are not merely incidental to the primary use under various headings of Chapter 49. (4) On perusal of the rate schedules in the aforesaid notifications and also the various chapters in the First Schedule to the CTA, 1975, the Applicant understands that aforesaid printed advertisement materials classifiable under Chapter 49 inter alia the following headings are found relevant: Heading Description of goods IGST 4901 Printed books, brochures, leaflets and similar printed matter whether or not in the single sheets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant submitted that Vinyl (self-adhesive) initially classifiable under Heading 3919, after being printed with the images/ text/trade monograms to promote the sales of the customers becomes a form of trade advertisement which is classifiable under Heading 4911. 6. Record of Personal Hearing: Sri Bipin Verma, the authorized representatives of the applicant appeared for Personal Hearing on 23.10.2019 and produced physical samples of the materials and reiterated the written submissions. 7. Discussion and Findings: We have examined the submissions made by the applicant in their application and the assertions made by the authorized representative as well at the time of Personal Hearing. We look into the first issue raised by the applicant i.e., whether the transaction of printing of content provided by the customer, on poly Vinyl Chloride banners and supply of such printed trade advertisement material is supply of goods. The applicant in the instant case takes up the supply of trade advertising material by procuring the required raw materials such as poly vinyl, flex, paper, cloth printing inks etc., all by themselves based on specification provided by the cli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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