What do we buy? Paper or contents.
H C Krishnaveni.
“Goods” as per CGST act mean every kind of movable property including crops, grass which can be severed before supply. While deciding the TCS case the Hon`ble Apex court had opined that as per article 266(12) of the constitution “goods” include properties both tangible and intangible and must be capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed etc. However “service” means ANYTHING other than goods. But when both goods and service are mixed in a single supply then the definition under section 2(90) has to be referred to decide which constitutes principal supply and ancillary supply.
In this context we need to look at the recent Karnataka Appellate Authority for Advance Ruling decision which has ruled that supply of access card with the information supplied by receiver is “supply of goods” and not “supply of services”. Authority for Advance Ruling, Karnataka had ruled that “The supply of ‘access cards”, and similar material printed by the applicant with the contents supplied by the recipient of supply are classifiable under SAC 9989 and liable to tax under CGST at 9%, KGST at 9% and at 18% under the IGST Act”. This decision was overturned by the Hon`ble Appellate authority.
The supplier receives the information of the persons who are desirous to have an access card to whatsoever premises. The activity of the supplier will be to buy paper on which the information given by the receiver will be printed / emdbedded alongwith some mundane activities of lamination is carried. The Appellate authority has relied on a “fact” that a “new product” known as “access card” emerges in the process. The appellate authority goes on to state that the principal supply is not the printing service but supply of access cards which is goods.
The supplier uses two inputs viz. paper and plastic, prints the “VITAL” information received from receiver on these paper, laminates the same and supplies it to the receiver. The main activity of the supplier is printing of the information supplied by receiver on the piece of paper which after printing the information becomes “access card”. The Lower Authority had rightly opined that the activity “is to be treated as Composite supply with the supply of services being the principal supply”.
In this era of numerous phobias access to any premises (even house) is restricted to only to the members who are connected / concerned or who have any transaction to be carried out with the people in the premises. Even the devotees to a temple enter with the specific purpose of having a darshan of the lord installed in such premises. Entry to any secured premises is controlled by the issue of access cards which will have the information of the person/s desirous of visiting the premises. This is necessary to screen the visitors to premises and filter out unscrupulous elements. The cards are just piece of paper without information of the person holding the same. The entry to the premises will not be possible with a card without any information printed / embedded on that piece of paper. A piece of paper becomes “access card” only with the information that is printed / embedded on it. The access card is given such name because of the valuable data that is present/ printed on it and not for the piece of laminated paper. It is to be borne in mind that the information present becomes the access card and the piece of paper without information does not become the access card.
This logic has been rightly explained in detail in the para 4 of the Board`s circular No. 11/11/2017-GST dated 20/10/2017 wherein they have rightly opined that the principal supply in the printing of books, pamphlets and the like constitute supply of service. But the Appellate Authority states that the activity is as per the view in the para 5 of the same circular wherein it is stated that supply of printed envelopes, letter cards, printed boxes, tissue papers, napkins with the design logo would constitute supply of goods. The above view of appellate authority is akin to the argument that while buying books or any printed material we give money for the paper and not the information or the content printed. Access card is preserved for the information that is printed / embedded and not for the piece of paper. Further the Railway ticket which is also an access card for the journey is preserved during the journey for the information and not for the piece of paper having some design or railway logo on it. However it is to be understood that napkins, tissue papers and wall papers are not bought for the logo or the brand but as material to be used. Further these products are not used for any other purpose other than as material / goods as such without any concern on the information printed on it.
We can also take the example of the ATM card which is nothing but piece of plastic without the account holders data that is embedded in / on the same. People buy books and news-paper for the information that is contained and it is not like buying napkins, tissue papers and the like. This aspect can also be verified form the point of valuation wherein the supplier would have charged substantial amount for printing and not for the piece of paper or the ink that is used for printing such access cards.
In this backdrop it is felt that the principal supply in access card is the activity of printing the information given by the receiver of the cards and the supply of cards as such is ancillary. The supply is composite supply with the principal being the activity of printing and the sale of paper which is of no significant value is ancillary to the act of printing. The supply of access cards does not constitute goods classifiable under HSN Code 4901 10 20 which includes brochures, leaflets and similar printed matter whether or not in single sheet and sold and bought as goods only without any importance of the content that is printed. The activity is covered as supply of service as principal supply under the Serial No. 27 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 and is liable to tax at 9% under the CGST Act. In the above context it is felt that the decision of the Appellate authority holding the supply as “goods” and not “service” is not in accordance of the spirit of the CGST act.
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