Printing Industry is a very wide Industry ranging from Newspapers to Commercial Books and Periodicals. The present update seeks to discuss about the divergent advance rulings pronounced by different AARs in the case of same assessee, M/s Macro Digital Imaging Pvt Ltd. where the applicant is registered in different States.
On the first occasion, the applicant has sought ruling before the Authority of Advance Ruling in the state of Telangana as to whether the supply of printed trade advertisement material will be treated as a supply of goods under (HSN 4911) or supply of services.The Applicant is in the business of printing and sale of printed trade advertisement material (i.e. banner flex), which is freely moveable from one place to another. The preparation of such printed material would be undertaken as per the customer’s designs and specifications. The clients / customers do not provide any materials and all materials required for the preparation of the advertisement materials are procured by the Applicant. The major cost incurred in the printing is for materials like ink, paper etc. On perusal of the rate schedules in these notifications, and also the various chapters in the First Schedule to the Customs Tariff Act, 1975, printed advertisement materials are classifiable under chapter 49. Furthermore, Chapter Note 5 to Chapter 49 of the Customs Tariff Act, 1975 inter alia provides that heading 4901 does not cover publications that are essentially devoted to advertising (for example, brochures, pamphlets, leaflets, trade catalogues, year books published by trade associations, tourist propaganda). Such publications are to be classified under heading 4911. Furthermore, reference has also been drawn to para 5 of TRU Circular No. 11/11/2017- GST dated October 20, 2017 wherein it is stated that the supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods, and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods, and therefore such supplies would constitute the supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff Act, 1975.
The Telangana AAR has held that supplying printed advertisement material to customers who only provide the specifications and designs to be printed, involves a transfer of title of goods and is a supply of goods classifiable under HSN 4911, which is liable to GST at the rate of 12%.
Based on the decision pronounced by Telangana AAR, the applicant has also sought ruling in the state of West Bengal where his distinct unit was situated on the same question and facts discussed earlier. The Applicant contended that printed advertising material is a composite supply. lt includes the supply of goods in the form of printed PVC material and of the service of printing the content provided by the recipient. The Applicant also argued, that it is the supply of the printed PVC material. The service of printing is ancillary and merely enhances the value of the advertising material. However, the West Bengal AAR has held that their activity is service of printing falling under SAC 9989. The applicant further appealed to the appellate authority against the ruling where it was confirmed by the Appellate Authority that in the present case, the service portion is predominant and so the activity shall be classifiable under services and shall be taxable accordingly.
The Applicant has sought the ruling in the state of Karnataka on the same question before the AAR whereby it was observed that the PVC sheet does not have any other usage other than displaying the advertisement content and the advertisement materials carry specific messages meant for customers and the contents are very specific to the product for which the advertisements are made and 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 of the appellant. It held that the supply is a composite supply, the supply of service being predominant.
A wide divergence in interpretation of the legal provisions on similar facts by different AARs creates compliance challenges for taxpayers who have multi-locational operations in different states which compels the taxpayer to follow different approaches in each state for a particular transaction and defeats the vision of One Nation One Tax. Similarly, as regards classification of solar power plants also, there were contrary advance rulings in the case of M/s Giriraj Renewables.
There is an urgent need to create a centralised appellate authority for advance ruling which could deal with the cases of conflicting decisions on the same issue by two or more advance ruling authorities. There is a need to make the advance ruling mechanism more effective efficient and more taxpayer-friendly, comprising of judicial members so that principle of consistency is followed.