M/s. Stark Photo Book's challenge to tax classification dismissed; court clarifies composite supply under SAC 998386.
In a significant judgment, the Kerala High Court has dismissed multiple writ petitions filed by M/s. Stark Photo Book challenging the tax classification of their printing services. The court upheld the tax authorities' decision that the activities carried out by the petitioners, which involve printing of photographs, brochures, books, magazines, posters, and similar items based on digital content supplied by customers, constitute a composite supply and are subject to 18% GST under SAC 998386.
The petitioners, operating an offset printing press, had argued that their activities should fall under HSN Code 4911, which attracts a lower GST rate of 12%. They contended that their work involves both supply of goods and services, with the printed products being the principal supply.
However, Justice Ziyad Rahman A.A., presiding over the case, clarified that the predominant element in the petitioners' activities is the service of printing, which is classified under SAC 998386. This classification includes photographic and videographic processing services, which cover printing of images from digital media. As such, the services attract the higher tax rate of 18%.
The court noted that the supply of goods, such as ink and paper provided by the petitioners, is merely ancillary to the principal supply of printing services. It emphasized that no transfer of title in goods occurs from the customers to the petitioners, as the digital content remains the property of the customers even after printing.
The court further dismissed the petitioners' reliance on previous clarifications and advance rulings under different tax regimes, stating that the CGST Act's scheme differs significantly from the Kerala Value Added Tax Act.
While the petitions were dismissed, the court allowed the petitioners the opportunity to pursue statutory remedies if they have grievances regarding the assessment of tax. The period spent in litigation will be excluded from the limitation period for filing such appeals.
This judgment reaffirms the classification of printing services under the SAC 998386, providing clarity on the tax implications for businesses engaged in similar activities.
Bottom Line:
GST - Classification of services for tax liability - Printing of photographs, brochures, books, magazines, posters, etc., based on digital content supplied by customers, constitutes composite supply - The predominant supply is the service of printing, classified under SAC 998386, attracting 18% GST.
Statutory provision(s): Section 74 of CGST Act, Section 2(30), Section 2(74), Section 2(90), Section 8, Schedule II of CGST Act, 2017, Article 226 of the Constitution of India
