Whether procurement of advertisements for the Directory is classifiable as selling of space for advertisement in print media?

PJ/Case Law/2020-2021/3587

M/s Infobase Services PVT. LTD.(West Bengal AAR) Advance Ruling No. 2020 (32) G.S.T.L. 570 (A.A.R. - GST - W.B.) dated 24.12.2019.
Brief Facts: The Tollygunge Club Ltd. has engaged the applicant for supplying the service of printing the ‘Directory of Members 2020’. The applicant entered into an agreement with the Club for marketing of advertisement space for the Directory. The applicant will have to finance the project cost of printing the Directory from the proceeds from sale of space for advertisements. If it exceeds the final project cost for printing, the applicant will gain 75% of the differential amount. If it does not cover the cost of such printing, the applicant will have to bear the losses to that extent. The applicant will raise tax invoice on the Club for the printing service. However, the Club will also raise invoice on the applicant for the amount by which the proceeds from sale of advertisement space falls short of the cost of printing. The applicant, in addition to supplying printing service, is also acting as an intermediary on behalf of the Club for selling space for advertisements.
Issue: Whether procurement of advertisements for the Directory is classifiable as selling of space for advertisement in print media and whether Sl. No. 21(i) of Notification No. 11/2017-C.T. (Rate), dated 28-6-2017 is applicable?
Applicant’s Contention:The applicant contends that the directory is not for commercial purpose and is a book which forms part of the Clause 2(zr) of the notification No. 9/2017-integrated tax rate dated 28.06.2017. The definition of print media is as follows
“includes books, as defined in Section 1(1) of the Press and Registration of Books Act, 1867, but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purpose”
Reasoning of Judgement:It has been observed by the authority that the applicant is making a bundled supply to the Club of printing service and intermediary service for selling space for advertisement on behalf of the Club and charging a single price for the bundle as the project cost for printing. The two services are not naturally bundled or supplied in conjunction with each other in the ordinary course of business. It is a specific feature of the agreement between the applicant and the Club. It is, therefore, not a composite supply but a mixed supply and shall attract highest rate of tax.
Selling of space for advertisement, when made as an intermediary, is classifiable under SAC 9983 62, which excludes sale of advertising space in print media and is taxable @ 18% under Sl. No. 21(ii) of the Rate Notification. Service by way of printing of all goods falling under Chapter 48 or 49 of the First Schedule of the Customs Tariff Act, 1975 (where the physical inputs are supplied by the printer) is taxable @ 12% under Sl. No. 27(i) of the Rate Notification. The mixed supply of the applicant should, therefore, be treated taxable under Sl. No. 21(ii) of the Rate Notification.
Further the authority has pronounced that Club’s supply of the service of selling space for advertisement is not considered as the Club is not the applicant. And so is not in the scope of AAR as per section 95 of the CGST Act.

Comment:- In case of Barbeque Nation Hospitality Ltd.(KAR/ADRG 03/2020 Date 09.01.2020), the Applicant for advance ruling is here by rejected, in terms of Section 98(2) of the CGST Act 2017 with the reason that AAR cannot be filed by recipient of Services or Goods or Both. The applicant raises the objection for charging GST on the Electricity charges and questions the lessors about the legal authority/ source of law.
In the similar case of Dr. Dathu Rao Memorial Charitable Trust (GST AAR Tamilnadu) Order No. 3/AAR/2018 dated 30.07.2018, the application was rejected without going into the merits of the case, on the issue of lack of jurisdiction.
With so many recipients urging to accept their applications, it is suggested that the government should widen the scope of Advance ruling authorities.
Prepared By- CA Akanksha Anchaliya

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PJ/Case Law/2020-2021/3587

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