Printing services using customer content is a service taxable at 18% GST.

Printing services using customer content is a service taxable at 18% GST.

Issue

Whether the printing of materials like books, wedding cards, and photos, where the content is provided by the customer but the physical materials (paper, ink) are supplied by the printer, should be classified as a “supply of goods” under HSN 4911 or a “supply of services” under SAC 998386, and what is the applicable GST rate.

Facts

• The petitioners were engaged in printing various materials such as books, magazines, wedding cards, and posters.
• The content for these printed materials was provided by the customers.
• The printers used their own paper, ink, and machinery to execute the printing jobs.
• The tax authorities classified this activity as a service under SAC 998386, attracting 18% GST, and issued assessments under Section 74.
• The petitioners challenged this classification, arguing it should be treated as a supply of goods under HSN 4911, which would attract a lower GST rate.

Decision

• The Kerala High Court held that the transaction constitutes a supply of service, not a supply of goods.
• It classified the activity under SAC 998386 (“Photographic and videographic processing services”), making it liable for 18% GST.
• The Court reasoned that since the customer owns and provides the content, there is no transfer of title in the primary “goods” (the content). The printer merely renders a reproduction service.
• It was determined that the supply of paper and ink is ancillary to the dominant nature of the transaction, which is the printing service itself.
• The High Court upheld a similar ruling by the Kerala Authority for Advance Ruling (AAR) and dismissed the petitions, but allowed the assessees to pursue statutory appellate remedies.

Key Takeaways

• Content Ownership is Decisive: The key differentiator between a supply of goods and a supply of services in printing is who owns the content. If the customer provides the content, it’s a service; if the printer uses their own content, it’s a sale of goods.
• Dominant Nature Test: In a composite supply involving both goods (paper, ink) and services (printing), the dominant component determines the classification. Here, the service of printing was deemed dominant.
• Broad Interpretation of “Photographic Services”: The ruling expands the scope of SAC 998386 to include modern digital and offset printing, not just traditional photography.
• Higher Tax Implication: This classification subjects a wide range of common printing jobs to a higher GST rate of 18%, significantly impacting the printing industry.