No GST on services to ‘educational institutions’ for examinations : AAR

ADVANCE RULING

AUTHORITY FOR ADVANCE RULINGS, TELANGANA

K L Hi-tech Secure Print Ltd., In re

TSAAR ORDER NO. 10 OF 2018

JULY  26, 2018

RULING

1. Under Section 100(1) of the CGST/TGST Act, 2017, any person aggrieved by this order can prefer an appeal before the Telangana State Appellate Authority for Advance Ruling, Hyderabad, within 30 days from the date of receipt of this Order.

ANNEXURE-I

(Questions on which advance ruling is required)

ANNEXURE-II

(Statement of relevant facts having a bearing on the questions raised)

The aforesaid activities of printing of Aadhaar card is done on paper.

Printing on Polyvinyl chloride (PVC) Cards

The Company provides the service of printing on Polyvinyl Chloride (PVC) cards of contents provided by customers. These PVC cards are plain plasticcards without any magnetic stripe.

ANNEXURE-III

(Statement containing the applicant’s interpretation of law and/or facts, as the case may be, in respect of the aforesaid questions)

1. Question -1:

1.1 Whether, in the facts and circumstances as explained in Annexure II, supply of service of:

2. Applicant’s interpretation of Law:

2.1 Applicant submits that the service provided to an educational institution, by the applicant in relation to conduct of examination by an institution is exempt by virtue of the notifications cited supra.

In this regard, the following are to be considered:

Natures of work undertaken for the aforesaid two activities are as follows:-

(a) Scanning activity

(b) Processing of results

The applicant carries out the aforesaid activities as an agent for Concealed Results Processing through Barcode systems for examination conducted by the educational institution. Upon completion of this activity, action is taken by the educational institution for communication of results. These services provided by the applicant are directly related to conduct of examinations by the educational institution. Hence, the applicant submits that the aforesaid exemption as outlined in the notification will be applicable to their case. Thus, the services provided by the applicant to the educational institutions by way of Scanning and results processing will not be liable to Goods and Service tax. The applicant submits that the aforesaid services of printing of pre-examination items, post-examination items and Scanning and processing of results provided by the applicant to an educational institution is towards conduct of examination. The services are normally not carried out by the educational institution by themselves but has to be outsourced to other service providers due to lack of infrastructure for printing, administrative convenience, confidentiality, volume etc. Accordingly, when such Services are procured by the educational institution they tantamount to the services relating to conduct of examination, which will aptly fall within the ambit of exemption outlined under Entry No. 66 of the Notification No. 12/2017 – Central Tax (Rate), dated 28th June, 2017 and as amended by Notification No.2/2018 – Central Tax(Rate), dated 25th January, 2018; Entry No. 66 of Notification No. 12/2017 – State Tax(Rate), dated 29th June, 2017; and Entry No. 69 of the Notification No. 9/2017 – Integrated Tax (Rate), dated 28th June, 2017 as amended by Notification No. 2/2018- Integrated Tax (Rate), dated 25th January, 2018. Hence, the said exemption notification has to be applied to the applicant’s case.

QUESTION : 2

As per the facts and circumstances as explained in Annexure II, what would be the classification and the GST rate, for the supply of services in the nature of printing of cheque books in the below mentioned two situations where the physical inputs of paper belongs to (i) the customer banks; (ii) the applicant?

4. Applicant’s interpretation of Law:

Classification of supply

4.1 The applicant carries out the activity of printing on the cheque paper in the above mentioned two situations i.e., input (paper) belonging to the customer banks and the Company.

Hence the product which is generated from the activity should be treated as “Cheque? and not “Cheque paper”, due to the following reasons:-

Thus, the applicant based on the above would prefer to the classification of the product which is printed by the applicant under the following Chapter heading as provided in Notification No. 2/2017-Central Tax (Rate), dated 28th June, 2017;Notification No. 2/2017- State Tax (Rate), dated 29th June, 2017 and Notification No. 2/2017-Integrated Tax (Rate), dated 28th June, 2017.

Accordingly, the rate of tax applicable to the product is NIL (i.e., NIL – Central Tax and NIL – State Tax or NIL – Integrated Tax).

Rate of tax

4.2 The rate of tax that will be applicable for the activity carried out by the applicant will be as under-

The applicant submits that the process of printing of cheques undertaken by the applicant is on the input, i.e., paper, belongs to customer bank, who are registered persons. Hence, the process of printing undertaken by the applicant should be construed as “job-work”.

Further, in terms of Entry No. 3 of Schedule II appended to the CGST Act, 2017, any treatment or process which is applied to another person’s goods is a supply service, and accordingly printing of cheque by the applicant shall be construed to be supply of service.

The applicant submits that the aforesaid activity of “job-work” carried out by the applicant will be taxable at the rate specified in Entry No. 26 with heading 9988(ii)(c) of Notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 as amended by Notification No. 20/2017-Central Tax (Rate), dated 22nd August, 2017 and Notification No. 31/2017-Central Tax (Rate), dated 13th October, 2017; Notification No.11/2017 -State Tax (Rate), dated 29th June, 2017 as amended by Notification G.O.Ms No.227, dated 05th October, 2017 and Notification No. 31/2017 – State Tax (Rate), dated 23rd November, 2017; Notification No. 8/2017- Integrated Tax (Rate), dated 28th June, 2017 as amended by Notification No. 20/2017-Integrated Tax (Rate), dated 22nd August, 2017 and Notification No. 39/2017-Integrated Tax (Rate), dated 13th October, 2017, which is as under:

Thus, the applicant based on the above facts submits that the activity of printing of cheque, the goods being the cheque in the given case would fall under within the ambit of Chapter 4907. Such goods attracts the rate of tax i.e., CGST, SGST and IGST as “NIL”. Hence, the activity of printing of cheque carried out by the applicant will be liable to tax under GST as treatment of process on goods belonging to another registered person being in the nature job work at the rate of 5% (2.5% -Central Tax and 2.5% – State Tax or 5% – Integrated Tax.)

(B) Physical inputs ie., paper belonging to the applicant:-

The applicant submits that even such supplies would be supply of services i.e., printing.

The applicant further submits that serial No. 5 of Circular No. 11/11/2017-GST, dated 20th October, 2017 which provides that:

“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 bythe 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” is ultra vires and quod contra legam fit, pro infectohabetur (What is done contrary to law is deemed not to have been done at all) as the Government is only empowered to notify transactions which are to be treated as ‘supply of goods and not services’ or ‘supply of services and not goods’. This power is vested under Section 7(3) of the CGST Act, 2017 and not to specify what the ‘principle element in a transaction is’.It is important to note that this will always be transaction and business specific; it cannot be specified on an all -pervasive basis. Hence, the applicant submits that the activity provided by them is purely a “service” in relation to printing where the content to be printed is specified by the banks and the applicant only prints such content on the paper.

Accordingly the activity of printing on the paper will fall within the ambit of Entry No. 27 with heading 9989(i) of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 as amended by Notification No. 20/2017-Central Tax (Rate) dated 22nd August, 2017 and Notification No. 31/2017-Central Tax (Rate) dated13th October, 2017, Notification No. 11/2017 -State Tax (Rate) dated 29th June, 2017 as amended by Notification G.O.Ms No.227, dated 05th October, 2017 and Notification No. 31/2017 – State Tax (Rate), dated 23rd November, 2017; Notification No. 8/2017-Integrated Tax (Rate), dated 28th June, 2017 as amended by Notification No.20/2017-Integrated Tax(Rate) dated 22nd August, 2017 and Notification No. 39/2017-Integrated Tax (Rate), dated 13th October, 2017 which is as under:

Thus, the applicant based on the above facts submits that the activity of printing of cheque, the goods being the cheque in the given case would fall under within the ambit of Chapter 4907. Such goods attracts the rate of tax i.e., CGST, SGST and IGST as “NIL”. Hence, the activity of printing of cheque carried out by the applicant will be liable to tax under GST as treatment of process belonging to the applicant itself will be liable to tax under GST at the rate of 12% (6%- Central Tax and 6% – State Tax or 12%- Integrated Tax).

QUESTION : 3

Whether, in the facts and circumstances as explained in Annexure II, what would bethe classification and the GST rate for, printing and supply of Aadhaar cards on paper to the Unique Identification Authority of India (UIDAI)?

6.Applicant’s interpretation of Law:

The applicant submits that the activity of printing and despatch of Aadhaar cards provided to Unique Identification Authority of India (UIDAI), by the applicant is a supply of service. The activity of printing of Aadhaar cards is carried out on-paper as explained in Annexure II.

There are two limbs in the aforesaid activity carried out by the applicant to UIDAI:-

Classification with respect to supply of printed Aadhaarcards:-

The applicant carries out the activity of printing of contents of Aadhaar on paper. The product which is generated from the activity will be treated by trade as well as in common parlance as paper, hence the classification that should be applied for the product as per the Notification No. 1/2017-Central Tax (Rate) dated 28th June, 2017, Notification No. 01/2017- State Tax (Rate) dated 29th June, 2017 and further Notification No.1/2017- Integrated Tax(Rate) dated 28th June, 2017 will be :-

Accordingly, the rate of tax applicable to the product is 5% (i.e., 2.5% – Central Tax and 2.5% – State Tax or 5% – Integrated Tax).

Rate of tax for printing of Aadhaar cards:-

6.1 The Applicant submits that supply of printing, laminating and enveloping, sorting, franking and dispatching is a composite supply of printing of Aadhaar card. Whereby, Jprinting of Aadhaar card shall constitute to be the principal Supply and the other services are ancillary to the principal supply and such ancillary service is naturally bundled.

The applicant further submits that serial No. 5 of Circular No. 11/11/2017-GST, dated 20th October, 2017 which provides that:

“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” is ultra vires and quod contra legam fit, pro infectohabetur (What is done contrary to law is deemed not to have been done at all) as the Government is only empowered to notify transactions which are to be treated as ‘supply of goods and not services or supply of services and not goods’. This power is vested under Section 7(3) of the CGST Act, 2017 and not to specify what the ‘principle element in a transaction is’.

It is important to note that this will always be transaction and business specific; it cannot be specified on an all-pervasive basis. Hence, the applicant provides that the activity provided by the applicant is purely a “service” in relation to printing where the content to be printed along with design and logo is provided by UIDAI and the applicant only prints such content on the paper. Accordingly the activity of printing on the paper will fall within the ambit of Entry No. 27 with heading 9989 (i) of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 as amended by Notification No. 20/2017-Central Tax (Rate) dated 22nd August, 2017 and Notification No. 31/2017-Central Tax (Rate) dated 13th October, 2017, Notification No. 11/2017 -State Tax (Rate) dated 29th June, 2017 as amended by Notification G.O.Ms No.227, dated 05th October, 2017 and Notification No. 31/2017 – State Tax (Rate), dated 23rd November, 2017; Notification No. 8/2017-Integrated Tax (Rate), dated 28th June, 2017 as amended by Notification No. 20/2017- Integrated Tax (Rate), dated 22nd August, 2017 and Notification No. 39/2017- Integrated Tax (Rate), dated 13th October, 2017, which is as under:-

Accordingly, the applicant beliefs that the rate of tax for the activity of supply of printed Aadhaar cards on paper to UIDAI will be 12% ie. (6% – Central Tax and 6% -State Tax or 12%- Integrated Tax).

QUESTION : 4

As per the facts explained in Annexure II, what would be the classification and the GST rate, for printing and sale of Polyvinyl chloride (PVC) Cards for various customers?

8. Applicant’s interpretation of Law:

Classification of supply

8.1 The applicant carries out the activity of printing on Polyvinyl chloride (PVC) Cards belonging to the applicant itself for various customers. These PVC cards are Plastic cards on which activity of printing is carried out by the applicant. The printed cards are in the nature of loyalty cards, identity cards and other cards of similar nature without any magnetic stripe.

Thus, the applicant based on the above would refer to the classification of the product which is printed by the applicant under the following Chapter heading as provided in Notification No. 01/2017-Central Tax (Rate) dated 28th June, 2017, Notification No. 01/2017-State Tax (Rate) dated 29th June, 2017 and Notification No.1/2017-Integrated Tax (Rate) dated 28th June, 2017.

Rate of tax

The applicant submits that printing activity specified above shall be taxable at the rate specified in Entry No. 27 with heading 9989 (ii) of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 and as amended by Notification No. 20/2017-Central Tax (Rate) dated 22nd August, 2017, Notification No. 11/2017 -State Tax (Rate) dated 29th June, 2017 and as amended by Notification G.O.Ms No.227, dated 05th October, 2017; Notification No. 8/2017-Integrated Tax (Rate), dated 28* June, 2017 as amended by Notification No. 20/2017-Integrated Tax (Rate), dated 22nd August, 2017 as outlined below, since the goods on which the activity of printing does not fall under Chapter 48 or 49:-

Thus, the applicant based on the above facts submits that the activity of printing on Polyvinyl chloride (PVC) Cards, the goods being the plastic cards in the given case would fall under within the ambit of Chapter 3920. Hence, the activity of printing on PVCCards carried out by your applicant will be liable to tax under GST at the rate of 18% (9% – Central Tax and 9% – State Tax or 18% – Integrated Tax).

During the course of personal hearing held on 30.05.2018 the applicant reiterated the submissions made in their application and requested for Advance ruling on the issues raised in their application.

3. DISCUSSION & FINDINGS:

The applicant sought advance ruling on different issues and each issue is discussed below:

3.1 Whether the following services are treated as exempted supply of service?

3.1.1 Exemption from payment of GST in respect of certain supplies of Services has been provided under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.02/2018-Central Tax ( Rate) dated 25.01.2018 .

3.1.2 In terms of Serial No.66 of the impugned notification exemption from payment of GST has been provided to the following supply of services as on date.

66. Services provided –

(a) by an educational institution to its students, faculty and staff;

(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee

(b) to an educational institution, by way of,-

Provided that nothing contained in entry sub-items (i), (ii) and (iii) of item (b)” shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.

Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of,- (i) pre-school education and education up to higher secondary school or equivalent; or (ii) education as a part of an approved vocational education course.”;

Further, the said Notification also provides definition for ‘educational institution’. In terms of the definition provided under the Notification,

(y) “educational institution” means an institution providing services by way of,-

So the services provided to ‘educational institutions’ for conducting of examinations are eligible for exemption under entry No.66 of Notification No. 12/2017-Central Tax (Rate) dt. 28.6.2017

3.2 What would be the classification and the applicable GST rate, for the supply of Printing of cheque book.

3.2.1 In this case, assessees are undertaking two types of supplies. (i) In respect of paper supplied by the banks, they print the cheque format of respective banks and (ii) physical inputs including paper and ink would be borne by the company and the cheques after printing as per the bank’s specifications, would be supplied to them. In both the cases, the unit prints the cheque and then supplies the cheque book to the bank after completion of the printing work.

3.2.2 In respect of the situation, where the paper is being supplied by the banks, and the applicants are undertaking job work of printing the cheque and converting them as cheque books, the predominant supply in the instant case is supply of service. As the ” services by way of any treatment or process on goods belonging to another person, in relation to- printing of all goods falling under chapter 48 or 49, which attract CGST @ 2.5% or Nil” are covered under sub-item ( c) of item (ii) at Serial No.26 of the Notification No.11/2017-Central Tax ( Rate) dated 28.06.2017 as amended, and the ” cheques, loose or in book form” being an exempted supply in terms of S.No. 118 to the Notification No. 02/2017- Central Tax (Rate) dated 28.06.2017, the supply of service by the applicant attracts GST @ 5% ( 2.5% CGST + 2.5% SGST).

3.2.3 In respect of supply of cheque books where the printing paper and inks are being borne by the applicants, the impugned goods merit classification under Tariff heading 4907 as goods and they are an exempted supply in terms of Serial No 118 to the Notification No.02/2017-Central Tax (Rate) dated 28.06.2017. Hence, cheques or cheque books would not attract any GST and are an exempted supply in terms of the Notification.

3.3 What would be the classification and the applicable GST rate, for the supply of Aadhaar Cards on paper.

3.3.1 As per the information provided by the applicant, they receive the data for printing from UIDAI in Unicode (extensible mark up language) file format. The said file format would be converted into a readable format and the details of aadhaar applicants along with their photographs, would be printed , laminated, enveloped and after franking, the aadhaar envelops would be dispatched to the concerned aadhaar applicant. In the instant case, the applicant is rendering various supplies like conversion of data to the required file format, printing of aadhaar cards, lamination, franking and dispatching etc. In the entire gamut of things being undertaken by the applicant, all the supplies made by them, are naturally bundled and supplied in conjunction with each other. Each of these supplies are not supplied separately and are dependent on other supplies provided by them. Any single supply will not serve the purpose and will not complete the task entrusted to them. Hence, the services can be considered as composite service in terms of section 2(30) of CGST/TGST Act, 2017. These services cannot be considered as mixed supply as each service is dependent on one another and all the supplies are provided in conjunction. Despatching of aadhaar card will not be complete unless it is printed, laminated and franked by the applicant. Likewise all the services are interdependent on one another. Hence it cannot be considered as mixed supply in terms of section 2(74) of CGST/TGST Act, 2017. In the entire gamut of things being undertaken by the applicant, it appears that, it is an activity of predominant nature of supply of service rather than supply of goods.

Accordingly, it appears that, the services rendered by the applicant merits as supply of service and accordingly falls under serial no.27 of Notification No.11/2017-Central Tax ( Rate) dated 28.06.2017 as amended and the rate of tax applicable is 12% ( 6% CGST + 6% SGST).

3.4 What would be the classification and the applicable GST rate, for the printing and supply of Polyvinyl chloride cards (PVC).

3.4.1 Assessees are undertaking printing on Polyvinyl chloride (PVC) cards to various customers. PVC cards are plastic cards on which activity of printing is carried out by the applicant.

3.4.2 In terms of GST Circular No.11/11/2017-GSTdated 20.10.2017, it is clarified that,

Subject: Clarification on taxability of printing contracts Requests have been received to clarify whether 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, would constitute supply of goods falling under Chapter 48 or 49 of the First Schedule to the Customs Tariff Act, 1975 (51of 1975) or supply of services falling under heading 9989 of the scheme of classification of services annexed to notification No . 11/2017-CT(R).

2. In the above context, 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.

3.4.3 From the aforesaid clarification, in the instant case since the PVC cards are belonging to the applicant, 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 supply would be classified as supply of goods falling under chapter 3920 of the Customs Tariff as made applicable to GST Tariff, hence it attracts 18% GST ( 9%CGST+9%SGST) as per Sl.No.106 of Schedule III of Notification No.1/2017-Central Tax (Rate) dated 28th June, 2017.

In view of the foregoing discussions, the following ruling is passed.

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