Printing industry is engaged in the supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc., printed with design, logo, name, address or other contents supplied by the recipient of such supplies. Sometimes besides the content, recipient also provides printing materials such as paper etc. to the printer to be used in such printing. Depending on the nature of printing, the printing activity may be a supply of goods or supply of services. The CBIC vide circular no. 11/11/2017-GST dated 20-10-2017 clarified the situation when the supply of printing activity would be treated as supply of goods and when the said activity would be treated as supply of services.
As per the said circular 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, would be treated as 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.
In the case of printing of books, pamphlets, brochures, annual reports, and the like, the supply of printing of the content supplied by the recipient of supply is the principal supply and accordingly such supplies would constitute supply of service, falling under heading 9989 of the scheme of classification of services, provided the following conditions are satisfied:
- Only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs.
- The physical inputs including paper used for printing belong to the printer.
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.
The relevant portion of the Circular has been reproduced below:
“2. …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.
3. Principal supply has been defined in Section 2(90) of the Central Goods and Services Tax 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.
4. 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.
5. 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.”
Difference between Para 4 and Para 5 of the Circular No. 11/11/2017
The main difference between para 4 and para 5 of the CBIC Circular No. 11/11/2017-GST dated 20-10- 2017 is usage right. In case of the para 4 items, the usage right remains in the hands of the supplier of the contents. However, in case of para 5 items such usage rights are not owned by the supplier of the design or logo etc. Further, para 4 items have no secondary use other than displaying the printed content however para 5 items have secondary use. E.g- Apart from displaying displaying designs printed or embossed in its body, wallpaper also protects the wall.
The Hon’ble Appellate Authority For Advanced Ruling, West Bengal in the case of Macro Media Digital Imaging (P.) Ltd held as below-
“On careful reading of the said paragraphs, it is 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.”
The Hon’ble Appellate Authority For Advanced Ruling, West Bengal in the case of Macro Media Digital Imaging (P.) Ltd further held as below-
“On reading paragraphs 4 and 5 of Circular No. 11/11/2017-GST dated 20.10.2017 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.”
Conclusion
Whether the printing activity would be treated as supply of goods or supply of services depends to a large extent on the ownership of usage rights of the intangible inputs. Depending on the nature of printing activity (i.e. supply of goods or supply of services) the applicable GST rate has to be applied.