Whether the Printing of Religious Texts for foreign party and delivering in India would amount to “Supply of Goods” or “Supply of Services”?

PJ/Case Law/2018-2019/3490

Case:SWAPNA PRINTING WORKS PVT LTD
Citation:28/WBAAR/2018-19 dated 21.12.2018 (ARN: AD 1909180002236)
Issue: Whether the Printing of Religious Texts for foreign party and delivering in India would amount to “Supply of Goods” or “Supply of Services”?
Whether this activity can be termed as an “Export”.
Brief facts:The applicant company Swapna Printing Works Pvt. Ltd., 52,Raja Rammohan Roy Sarani, Amherst Street, Kolkata-700009is engaged in the business of Printing registered with GSTN 19AADCS8593E1ZW. It procured an order from a foreign party to print religious texts and then to deliver them to various places in India.It made an application to the Advance ruling authority to know if such activity classifies as 'Supply of goods' or 'Supply of services' – It also seeks to know whether such activity can classify as 'export'.

Appellant’s contention: The Applicant is in the business of printing books and binding them. It has received a specific order from a popular foreign customer, namely Gideons International, for printing and binding Bibles. The version of the Bible is specified by the customer under the Evangelistic version of the text. Under the Berne Convention, the copyright is granted to the author on the creation of work, but in the case of religious texts copyrights are granted to editions if they are unique or are translations. In the United Kingdom, the King James' Version of the Bible is covered by a Crown Copyright. The Gideons International uses the King James' version of the Bible and distributes various editions of the same. The versions that the Applicant prints for The Gideons International mention the name of the organization and establish their rights on those versions.

Respondent’s Contention and reasoning of Judgement: On the basis of the Content of the Appellant, it becomes clear that the rights of the content of the printed matter do not lie with the Applicant. It can be said that the Applicant is providing a composite supply wherein the supply of printing content, is the principal supply and the physical inputs, such as paper, ink, binding material, labour etc., are ancillary to this principal supply. It is also clarified that the applicant does not hold the title of the Rights of the matter printed. However TRU Clarification issued under F. No. 354/263/2017-TRU dated 20th October 2017 by the Ministry of Finance, Department of Revenue, Government of India, clearly states in Serial no. 4 that :
In 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 belongs to the printer, supply of printing [of 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."
The Applicant's activity fits this description and to be classified as "supply of services" under the GST Act and such activity, unless anything is found to the contrary, will be leviable to GST @ 12% under Serial No. 27(i) of Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended by Notification No 31/2017-CT(Rate) dated 13.10.2017.
The Applicant also submitted photocopies of purchase orders received from The Gideons International (PO18449 dated 23/02/2018 and PO18765 dated 31/08/2018), and Tax Invoice No. 29/08/2018 dated 29/08/2016, as a prototype of such invoices. It appears from the purchase orders that printed copies of the Bible are required to be delivered to the recipient's branch in India who also take delivery on behalf of The Gideons International. Such persons, who receive the supply on behalf of the recipient, are also considered recipient, as defined under section 2(93) of the GST Act. The Applicant is, therefore, supplying the service of printing the Bible (the purchase orders and the tax invoice refer to supplying of printing service classifiable under heading 9989) to the recipient located in India. It is, therefore, obvious from the above discussions that the Applicant's supply is not the export of service, as the recipient of the service is located in India. It violates clause (b) of section 2(6) of the IGST Act which states that the recipient of service must be located outside of India.
Decision: The Applicant's activity of printing the Bible under the specific orders received from The Gideons International is a supply of service classifiable under SAC 9989. The above service is supplied to the recipient located in India and the consideration is apparently received in INR. The basic condition for export of service is that the amount should be received in convertible foreign currency. Hence, it cannot be termed as export of service. The Applicant is, therefore, liable to pay GST under the appropriate Act on such supplies.
Comment: In the above case, the jist of CBIC circular has been taken into consideration and it was concluded that the Printing of books by SWAPNA PRINTING WORKS PVT LTD would amount to Supply of “Services” and not Supply of “Goods” as contend of the book belong to author. Though the material like paper, ink etc. is also used by supplier but the principal supply is of printing of content. Hence, following the concept of composite supply under Section 2(30) of CGST Act, the complete activity will be classified as supply of service.

Similarly, in case of heart surgery also, where value of material like stent is high, however, it will be classified as health care service because, the principal supply is of treatment of patient. Similarly, in case of job work by textile processors, the value of material like chemical, dye, coal, packing material etc. may be high but the principal supply is service of job work, hence it will be classified as supply of service.
Prepared by: Adit Gupta

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PJ/Case Law/2018-2019/3490

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