Applicability od GST on Supply of Answer Booklets/Answer copies/OMR sheets to Educational Institutions

AAR, Rajasthan has pronounced judgment on 18.9.2020, in the case of Markk Business Private Limited (2022) 37 J.K.Jain’s GST & VR 206, that;

“The activity of printing of Answer Booklets/Answer copies and supplying it to Educational Institutions with or without OMR to be used in examinations by using its own raw material consisting of paper, printing ink etc. is “Supply of Goods” falling under Heading/Tariff item 4820 of entry No.123 of the schedule II to the notification 01/2017 dated 28.6.2017 liable to GST@12%”.

Background :

The applicant is engaged in the business of supplying answer booklets/ copies to educational institutions as mentioned by the applicant in their form GST AAR-01 dated 27.5.2020.

The applicant has sought advance ruling on classification and nature of the activity of printing of Answer Booklets/Answer copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper, printing ink etc.

The nature of the activity carried out by the applicant for printing of Answer Booklets/Answer copies with or without OMR and supplying it to Educational Institutions which is to be used in examinations by using its own raw material consisting of paper, printing ink etc. further it is observed that the content as provided by educational institutions such as its name, logo, serial No., watermark is printed on the answer booklets for its identification. The issue to be decided in this case is to whether the activity carried out by him will be treated as a supply of goods or supply of service.

Findings by AAR :

In this regard, the AAR finds that the CBIC has issued Circular No. 11/11/2017-GST dated 20.10.2017, which is as under:

It is clarified that supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc. printed with logo, design, name, address or other contents supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on the basis of what constitutes the principal supply.

Principal supply has been defined in S.2(90), CGST Act as 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.

In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing of the content supplied by the recipient of supply is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.

In case of 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 supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff.

Analysis by AAR :

As per the circular, if the activity of printing gives essential character to the printed product, it will be supply of service. If the usage of the product gives essential character, it will be supply of goods.

In the instant case applicant is supplying answer booklets/copies with or without OMR having its name logo etc. of his customer and the printing material used in printing of the said items pertains to the applicant. We further observe that the supply of printing to the content as supplied by the recipient of the supply is the ancillary to the principal supply of the answer booklets/copies with or without OMR, Therefore the supply will be considered a supply of goods falling under respective heading of chapter 48 or 49 of Custom tariff.

To ascertain under which chapter heading will supply of goods be covered either Chapter 48 or 49 of the customs Tariff, the Circular No.1052/1/2017-CX dated 23.2.2017 issued under the Central Excise Regime relevant extract of which is reproduced as under:–

Representations have been received from trade associations that consequent upon insertion of Chapter note 14 (w.e.f. 28.5.2012) to the Chapter 48 of Central Excise Tariff Act, 1985 disputes have cropped up in respect of classification of railway/bus/other tickets/passes, railway ticket rolls and bus ticket rolls, mark sheets/certificates, OMR Sheets/ Answer Books with OMR, Answer booklets, inland letter cards, passbooks, applications forms, paper outer strip seal, Railway receipt (RR) and practical notebook. Also, reports received from field formations suggest that there is divergent practice of assessment of these goods. It is therefore, proposed to clarify the classification of these goods to ensure uniformity in practice of assessment across the country.

In this connection, statutory provisions are as under:

(a) As per Rule 3(c) of General Rules for the interpretation of the Schedule, “when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration”

(b) In the light of above statutory provisions and decision of the Hon’ble Apex Court, Classification of the goods ibid was examined and it is clarified as under; (a)……….……………(b)…………..……………

(c) OMR sheets-Like mark sheets and certificates these are loose sheets cut to size and therefore are not covered u/heading 4820 and also provision of Chap. note 14 is inapplicable in the matter. The printing on these documents gives their essential character. In view of explanatory note to heading 4911 they are classifiable under heading 4911.

(d) Answer books with or without OMR, answer booklets and passbooks─These are not loose sheets, cut to size and therefore these are not out of the purview of heading 4820. Printing on these goods is merely incidental and such goods are intended to be used for further printing or writing. Answer books with or without OMR and answer booklets are intended for completion in manuscript while passbooks are intended for completion in manuscript or typescript. Provisions of Chapter note 12 and 14 of Chapter 48 and provisions of Rule 4 of General Interpretative Rules are applicable in the matter and therefore these are classifiable under heading 4820. ……………………………….

Further the Circular No.1057/06/2017-CX 7.7.2017 has clarified that exercise Books have been explained in HSN u/explanatory note (2) to Heading 4820 as, “These may simply contain sheets of lined paper but may also include printed examples of handwriting for copying in manuscript”. Such exercise Books are specifically classified u/heading 4820 of the erstwhile CETA, 1985. These are nothing but stationary items having blank pages with lines for writing and may also include printed texts for copying manually. In common parlance they are more akin to handwriting “Note books” for practicing rather than “work books” containing printed exercise. This definition of Exercise Books is in harmony with other items specified u/Chapter Heading 4820 of erstwhile CETA, 1985 such as registers, note books, diaries, letter pads etc. where printing is incidental to their primary use i.e., writing. The fact that printing is incidental to their primary use is the guiding principle for classification of Exercise Books u/heading 4820 of erstwhile CETA, 1985…

According to circular No.1052/1/2017-CX dated 23.2.2017, and the Circular No.1057/06/2017-CX dated 7.7.2017, the Answer booklets with or without OMR fall under chapter heading 4820. It is including Note books, Exercise book, etc. where the predominant activity is its use for writing and printing is merely incidental or ancillary to the primary activity.

The goods falling under heading no.4820 falls under Sch.II & III to the notfn No.01/2017-CT(R) dated 28.6.2017 as detailed below:

(i) 4820 (S.No.123 of Schedule):–Exercise book, graph book & Laboratory note book and Notebooks.

(ii) 4820 (S.No.154 of Schedule II):–Registers, account books, order books, receipt books, letter pads, memorandum pads, diaries and similar articles, blotting pads, binders, folders, file covers, manifold business forms, interleaved carbon sets and other articles of stationery, of paper or paperboard; and book covers, of paper and paperboard other than note books and exercise books.

The definition of the Note book in the dictionary is that: A notebook is a blank book that you can write in. Students often carry note books, where they can take notes (and doodle). The pages in a notebook are often lined, so that you can write neatly.

Similarly, the Answer Booklets/Answer copies is also blank books and pages in often lined and used to write during examination. Accordingly, classifiable under Chapter Heading 4820 of entry 123 of the schedule II as is applicable in case of Note books.

In view of the above, the ARA find that the activity of printing of Answer Booklets/Answer copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper, printing ink etc. is ‘Supply of goods’ falling under chapter Heading/Tariff item 4820 of entry 123 of the schedule II to the notfn 01/2017-CT(R) dated 28.6.2017 as amended and chargeable to GST @12% (CGST 6% + SGST 6%).

Ruling:

In view of the foregoing, the ARA ruled as follows:–

The activity of printing of Answer Booklets/Answer copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper, printing ink etc. is “Supply of Goods” falling under Heading/Tariff item 4820 of entry No.123 of the schedule II to the notification 01/2017 dated 28.6.2017 as amended and chargeable to GST@12% (CGST 6% + SGST 6%).

For further details refer ruling of ARA, Rajasthan in the case of Markk Business Private Limited (2022) 37 J.K.Jain’s GST & VR 206.

CA Om Prakash Jain s/o J.K.Jain, Jaipur

Tel: 9414300730