Time Education Kolkata Private Limited ., In re

1. In terms of Section 102 of the Telangana Goods and Services Tax Act, 2017 (TGST Act, 2017 or the Act), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard.

2. Under Section 103 (1) of the Act, this advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only

(a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling;

(b) On the concerned officer or the jurisdictional officer in respect of the applicant.

3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.

4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.

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Subject: GST – Appeal filed by M/s. Time Education Kolkata Private Limited,95B, 2^nd Floor, Siddamshetty Complex, Park Lane, Secunderabad – 500 003, Telangana State under Section 100 (1) of TGST Act, 2017 Against Advance Ruling TSAAR Order No.28/2021 dated 06.12.2021 passed by the Telangana State Authority for Advance Ruling – Order-in- Appeal passed – Regarding.

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1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Time Education Kolkata Private Limited, 95B, 2^nd Floor, Siddamshetty Complex, Park Lane, Secunderabad – 500 003, (hereinafter referred in short as ‘the appellant’ or ‘Time Education’ ). The appellant is not registered under GST has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules. The appeal is filed against the Order No.28/2021 dated 06.12.2021 (“impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax) (herein after referred as “Advance Ruling Authority” / “AAR” / “lower Authority”).

Brief Facts:

2. M/s Time Education Kolkata Private Limited is in the business of purchase and supply of advertisement space to the prospective In the course of supply of advertisement space they are also supplying artwork to adorn the space. They are desirous of ascertaining whether supply of artwork along with the space amounts to supply of advertisement space or other service. Hence this application

Questions raised:

1. Whether the services supplied by the applicant can be termed as the supply of space for advertisement in print media?

2. If yes, [email protected]% can be charged on the invoices raised to the customers?

3. Any consequential questions that may arise during the hearing.

3. The applicant has sought clarification on sale of space for advertisement when it is supplied along with the artwork, where no consideration is charged for the artwork in certain cases. The understanding of the applicant is that the activity of artwork by the applicant forms part of composite supply of advertisement space and artwork and therefore the total supply should attract tax @5%.

4. The AAR has observed that, selling of space for advertisement in print media (SAC 998362) is taxable at the rate of 2.5% under CGST & SGST respectively as per serial no.21 (i) of Notification No. 11/2017-CT(Rate) dated 28.06.2017 as amended. As against this, the service for ‘Sale of other advertising space or time’ is enumerated as 998366 in the SAC given in the annexure to the notification. This is not specifically mentioned in the serial no. 21(i) or (i)(a) of the above notification. Clearly this service will fall under item (ii) of serial no. 21 i.e., other professional, technical & business services taxable at the rate of 9% under CGST & SGST respectively.

5. Further, AAR examined that the Notification makes a clear distinction between sale of mere advertisement space and ‘Other advertisement space’, which is having a separate SAC code i.e., 998366. The applicant is supplying (2) different services and each is attracting different tariffs under this notification. Therefore the question of deducing a composite supply from the combination of drafting a design and incorporating a space does not arise. Hence where only space for advertisement and print media is supplied (SAC 998362) the rate of tax applicable is 2.5% under CGST & SGST respectively and where they are supplying ornate space it shall be treated as other advertisement space falling under item (ii) of serial no. 21 and accordingly will attract tax @9% under CGST & SGST respectively.

6. In view of the above discussions, the AAR passed the following ruling :

1. Whether the services supplied by the applicant can be termed as the supply of space for advertisement in print media?

7. Aggreived by the said order, the appellant filed the appeal before the Appellate Authority and submitted their averments claiming rate of tax under Serial No. 21(i) of the Notification No. 11/2017-CT(Rate) dated 06.2017. The submissions made by the appellants is detailed as under :

A. The Appellant’s business activity involves purchase of space in print media at a discounted rate for different regions and different parts of the newspapers i.e., Front page, Inside Cover Page, Inside Page Black & White and the space so procured is meant for sale to the applicant’s customers after adding the margin.

B. Appellant will re-sell the space bought from the print media to the various advertisers after adding the margin. In some cases, applicant will also undertake the preparation of artwork, if required by the Here it is pertinent to note that there will be no extra amount charged for the artwork and the amount charged is same in all cases i.e., whether or not appellant provides the service of artwork, the price remains the same.

C. Mere addition of ‘Art work’ with ‘Print media Advertisement space’ to be sold’ will not change the classification from HSN 998363:

1. Appellant contended that the Appellant proposes to sell Advertisement space in Print media with or without artwork and no additional consideration would be charged for addition of the artwork. In both cases (with or without artwork), the understanding of Appellant was that transaction will classify under HSN 998363 and GST attract at 5% (CGST 2.5% + SGST 2.5%) in terms of Sl. No. 21(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended. The ruling passed by the Authority has held that GST rate is

a. 5% if artwork is not added and

b. 18% if the artwork is added in the scope of Appellant (falls under HSN 998366)

Appellant is aggrieved to the extent of ruling that the classification made (HSN 998366) when the Advertisement space in print media is sold with addition of artwork and GST rate thereon.

2. In the instant case, the relevant extracts of Explanatory Notes to HSN (Classification of services) are given below:

“998363 Sale of advertising space in print media (except on commission)

This service code includes sale of advertising space in books, brochures, pamphlets, etc.; sale of advertising space in newspapers, journals and periodicals; sale of advertising space in postcards, timetables, forms, posters or other printed matter

998364 Sale of TV/radio advertising time (except on commission)

This service code includes sale of TV and radio advertising time

998365 Sale of Internet advertising space (except on commission)

This service code includes sale of Internet advertising space

998366 Sale of other advertising space or time (except on commission)

This service code includes:

– sale of advertising space on billboards, buildings, vehicles, etc.

– sale of advertising space in electronic media other than on-line

– sale of advertising space in video and motion pictures (product placement)

– sale of naming rights for tournaments, stadiums, etc.”

3. As seen from the above, HSN 998366 covers only the ‘other type of Advertising space/time’ viz., Electronic Media, Billboards, Buildings etc., and not the other services rendered along with Print media advertisement space. Therefore, averment of impugned order that appropriate classification is HSN 998366 is incorrect and runs contrary to the plain language of the explanatory notes. Further, the impugned order also has not given any reason/basis to classify under HSN 998366.

4. It is submitted that the proposed activity of the Appellant amounts to selling of space for advertisement only even artwork is added as the entire amount charged would be for space selling and there will be no extra amount charged for the artwork and it will be given purely as complementary. Therefore, the presence of the artwork would not change the nature of supply made by the applicant and hence remains the ‘supply of space selling in print media’ and accordingly falls under HSN 998363 and applicable GST rate is 5% in terms of Sl. No. 21(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017.

5. Appellant further contended before Ld. Authority that the even if the artwork is to be treated as another service, then it becomes the combined supply of two services namely sale of space and In such case, the provisions of Section 8 of CGST Act, 2017 (similar provisions contained in the TGST Act, 2017 and also the same made applicable for the IGST Act, 2017) shall be applied and applicable tax rates are determined accordingly. Appellant has pleaded that impugned transaction will become ‘Composite supply’ defined u/s. 2(30) of CGST Act, 2017 and the ‘Selling space’ would be ‘principal supply’ thereby the GST rate applies is 5% for the entire gamut of transaction.

6. However, the impugned order brushed aside the above submission merely stating that the appellant is supplying 2 different services, and each is attracting different tariffs. In this regard, it is submitted that the whole purpose of Section 8, ibid and theory of ‘Composite supply’ is to provide the determination of the classification & GST rate (liability) when 2 or more supplies are made together. If the analogy of the impugned order is accepted, then the Section 8, ibid would become redundant or Otiose. It is settled law that the legislature uses every word, phrase, sentence, or part thereof is for a purpose and the legislative intention is that every part of the statute should be given effect and any interpretation making any words or part of legislature redundant shall be avoided. In this regard, relied on Chief Information Commissioner Vs State Of Manipur 2012 (286) E.L.T. 485 (S.C.); Bansal Wire Industries Ltd. vs. State of U.P. 2011 (269) ELT 145 (S.C.). Therefore, the averment of impugned order to say that present transaction is not ‘composite supply’ is wholly incorrect and requires to be set aside.

D. Appellant once again wishes to explain how the present transaction would become ‘Composite supply’ and GST rate of 5% (as applies to the ‘Selling of space’) applies.

1. The section 8, ibid reads as under:

“8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—

(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;”

2. From the above, it is clear that if the supply comprising of the two or more supplies is ‘composite supply’ then the entire supply shall be assessed as ‘principal supply’ among them and the tax liability as applicable to ‘principle supply’ shall be applied to the entire supply. The definition of ‘composite supply’ is extracted below:

Section 2(30) of CGST Act, 2017:

“composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;”

3. The definition of ‘composite supply’ (extracted above) lays down the following criteria:

a. Supply should consist of two or more taxable supplies of goods or services or both, or any combination thereof: In the instant case, there exists space selling and also the artwork (assuming it as rendition of another service and without prejudice to the grounds submitted in the beginning)

b. Naturally bundled: What constitutes ‘naturally bundled’ was not defined or prescribed under the provisions of GST law. In such case, applying the trade parlance theory, applicant submits that the instant case is naturally bundled inter alia due to

i. The customer perceives it as space selling;

ii. The artwork would be given as complementary and there will be no extra amount charged from the customer who is availing the service of artwork. This is done to increase/promote the business of the space selling.

           iii. This is the trade practice prevailing in the market

c. Supplied in conjunction with each other in the ordinary course of business: The artwork would be given in conjunction with the space selling service and the presence of the both components occur ordinarily in the trade and are linked in the gamut of the advertising activity.

d. One of which is a principal supply: Between the space selling and the artwork, the activity of space selling is the ‘principle supply’ as enumerated above.

4. Once the instant activity falls under the scope of ‘composite supply’ then tax liability shall be determined as applicable to the ‘principle supply’ which is defined under sub-section (90) of Section 2 of CGST Act, 2017 and reads as follows

“principal supply” means the 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

5. From the above referred definition, Applicant understands that in the instant case sale of space is the principal supply in the composite supply as the sale of space constitutes predominant element and the artwork is only ancillary and would be given as complimentary.

E. Further, the press release dated 23.08.20 17 given by Ministry of Finance, GOI clarified as follows:

“If the advertisement agency supplies any service other than selling of space for advertisement, such as designing or drafting the advertisement, and such supply is not a part of any composite supply, the same would be liable to tax @18%. If such supplies are part of any composite supply, the rate applicable for the principal supply shall apply.”

The artwork by Appellant forms part of composite supply as explained above and the principal supply is the sale of space for advertising thereby the present transaction is classifiable as ‘Sale of space for advertisement in Print media’ under HSN of 998363 and liable for GST @ 5%.

F. Appellant further submits that the similar issue was dealt with by the Authority of Advance Ruling, Uttarakhand vide Ruling No. 03/2019-20 dated 12.06.2019 in the case of M/s. Harmilap Media Private Limited in 2020 (3) TMI 293 wherein it was held that supply of service by way of selling of space for advertisement in print media along with the art work is a composite supply where the principal supply is selling of space for advertisement in print media and the applicable rate of tax is 5%. The relevant extracts are given below:

“B.4 In this situation we observe that there is involvement of two supply of services (i) selling of space in print media and (ii) designing/composing of the advertisement. Accordingly, the same falls under the definition of “composite supply” inasmuch as two taxable supplies of services are naturally bundled and supplied in conjunction with each other in the ordinary course of business. Now the question arises which one of them is a principal supply. It is obvious that “selling of space in print media” constitutes the predominant element of a composite supply and designing/ composition of the advertisement is ancillary to the said composite supply. Accordingly, we observe that composite supply comprises of selling of space in print media and designing/co mpos-ing of the advertisement, will attract GST @ 5% inasmuch as “selling of space in print media” is a principal supply which attract GST @ 5%”

G. In view of the foregoing, it is respectfully prayed that the Ld. Appellate Authority of Advance Ruling, Hyderabad may be pleased to:

a. set aside/modify the impugned advance ruling passed by the Authority for Advance Ruling as prayed above.

b. grant a personal hearing, and

c. pass any such further or other order (s) as may be deemed fit and proper in facts and circumstances of the case.

Whether the appeal is filed in time:

8. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 06.12.2021 was received by the appellant on 14.12.2021 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 12.0 1.2022, which is within the prescribed time-limit.

Personal Hearing: 

9. In terms of Section 101(1) of the Act, the appellant was given personal hearing, in virtual mode on 31.01.2022. Shri Sudhir V.S., Chartered Accountant of M/s. Hiregange & Associates LLP and Authorised Representative appeared for the Appellants. The appellants reiterated their written submissions made along with the application and no additional submissions were made at the time of personal hearing. They requested to set aside the advance ruling in respect of said issue that are being contested and consider their appeal favourably.

Disscussions and Findings : 

10. We have gone through the order of the lower authority, appellants submissions and all other relevant documents. The appellants are claiming that, they sell Advertisement space in Print media with or without artwork and no additional consideration would be charged for addition of the artwork. In both cases (with or without artwork), the transaction will classify under HSN 998363 and attract GST at 5% (CGST 2.5% + SGST 2.5%) in terms of Sl. No. 21(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended.

11. At the outset, the issue to be discussed and decided is, whether the activity is classifiable under HSN 998363 and whether the GST @ 5% is applicable in terms of Sl. No. 21(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended.

12. In this context, the relevant extract of explanatory notes issued by the Board is reproduced for ease of understanding.

9983 – Other professional, technical and business services (except research, development, legal and accounting services)

99836 – Advertising services and provision of advertising space or time.

998361 – Advertising services – This service code includes planning, concept development and execution of the full range of services for an advertising campaign, including creating the basic idea for an advertisement, writing the words and scenarios for advertisements, selection of media to be used, design of ads, illustrations, posters, etc., writing of scenarios for advertising movies, placement of advertisements in media; development and organization of direct marketing advertising campaigns, i.e. sending advertising and promotional messages directly to consumers through methods such as direct mail and telemarketing, rather than via mass media; aerial advertising services; delivery services of free samples and other advertising material; demonstration and presentation of advertising services at point of sale; sales promotion (if no orders are received).

998363 – Sale of advertising space in print media (except on commission) – This service code includes sale of advertising space in books, brochures, pamphlets, etc.; sale of advertising space in newspapers, journals and periodicals; sale of advertising space in postcards, timetables, forms, posters or other printed matter

998366 – Sale of other advertising space or time (except on commission) This service code includes:

– sale of advertising space on billboards, buildings, vehicles, etc.

– sale of advertising space in electronic media other than on-line

– sale of advertising space in video and motion pictures (product placement)

– sale of naming rights for tournaments, stadiums, etc.

13. A simple reading of above notes, clearly envisages that HSN 998366 relates to space other than print media, i.e., advertisements on Billboards, Buildings, Vehicles, Electronic media, and advertising in video & motion pictures. Print media includes books, brochures, pamphlets, etc.; newspapers, journals and periodicals; postcards, timetables, forms, posters or other printed matter. The activity of the appellants in the subject case is sale of advertising space in print media and is not on Bill boards, Buildings, Vehicles etc. Therefore, the findings of AAR and its ruling with regard to classification of service is not in consonance with the explanatory notes. As such a fresh look at the activity or service provided by the appellant has to be examined.

14. In this context, it is pertinent to note that, Advertising services is a specialized service, which includes a host of activities like planning, concept development, creating the basic idea for an advertisement, writing the words, selection of media to be used, design of ads, illustrations, posters, placement of advertisements in media etc. In the instant case, appellant is selling space for advertisement in print media. Further in some cases, apart from selling space, he is also providing art work, which makes the advertisement more appealing and attractive. And such additional activity is done at no extra cost. However, costing comes into picture after classification. Value addition does not have a bearing in classifying the nature of service provided. As such, the processes, the ingredients, quantity of inputs used in supply, the purpose of art work and its impact of appearance of advertisement will have a bearing on the nature of service supplied.

15. In view of the above, apart from selling the space for advertisement in print media, the appellant is also providing the services of designing or art work as pronounced in their contentions. Advertising in itself is a specialized service, where the act of exhibiting or marketing information about a product or service provided is important, so as to attract the attention of prospective customer who is likely to be a buyer or customer of the advertiser of that product or service provider. Certainly design or art work will have an impact on the content of advertisement, by which the prospective customer is attracted and falls a prey for the proposed business activity. Therefore, addition of art work cannot be called as a mere activity, but a special feature which enhances the appearance of advertisement and draws attraction of prospective customer. The appellant’s contention that art work is provided at no extra cost does not hold any water, in as much as the same is done during the course of furtherance of business. The appellant is already receiving consideration for the service provided and appellant’s claim that no extra cost is charged does not influence the nature of activity. As seen from the explanatory notes under 998663, it is ‘sale of advertising space in print media’ which clearly notify that the vacant space or blank space is for the purpose of advertising only. In this context, a reference to explanatory notes under HSN 998361 is essential for understanding the nature of service provided by the appellant.

998361 – Advertising services – This service code includes planning, concept development and execution of the full range of services for an advertising campaign, including creating the basic idea for an advertisement, writing the words and scenarios for advertisements, selection of media to be used, design of ads, illustrations, posters, etc., writing of scenarios for advertising movies, placement of advertisements in media; development and organization of direct marketing advertising campaigns, i.e. sending advertising and promotional messages directly to consumers through methods such as direct mail and telemarketing, rather than via mass media; aerial advertising services; delivery services of free samples and other advertising material; demonstration and presentation of advertising services at point of sale; sales promotion (if no orders are received)

16. From a combined reading of discussion at para 15 above and the explanatory notes, as the appellant is selling space and also providing design or art work, the activity cannot be called as mere selling of advertising space but ‘Advertising Service’ falling under HSN 998361. Therefore, the concept of composite service for deciding the rate of tax, cannot be applied to Advertising Service, which involves host of activities which have their own relevance and importance. The intent of leaving a space empty is for the purpose of advertisement only. In general, advertising means the action of calling something to the attention of public for the purpose of business. As such activities like, design, color, shape, illustrations, etc are equally important. More so the intent of selling the space is for advertisement, as such selling of space cannot be vivisected for the purpose of classification and taxation.

17. Further, in such specialized services, the nature of service can be decided on the basis of contract or agreement and each contract may have different activities involved. The purpose of advertisement will also have impact on what kind of art work is required. The appellant has not submitted any contract or agreement which tells about the scope of activity involved in printing the advertisement within the given space in print media. As such any additional work or service provided to enhance the appearance of advertisement cannot be called as mere sale of advertising space in print media.

18. We have also gone through the citations quoted in their support. In view of the discussions the same are not relevant in this case. The appellant has also contested on other aspects like reason and limitation which is not warranted in the present case, in as much as the tax payer is yet get registered and also did not produced any document to establish the kind of artwork or design work provided by them.

19. In the light of the foregoing, the ruling of AAR with regard to classification of service under SAC 998366 is set aside and we pass the following:

ORDER

1. The services supplied by the applicant fall under ‘Advertising Services’, which is having a separate SAC code i.e., 998361.

2. GST is payable @ 18% as discussed above in terms of Serial No. 21 (ii) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017, as amended.

20. The ruling of the lower authority is modified to the extent of above order and the subject appeal is disposed accordingly.