This may cause another controversy in the goods and services tax (GST) regime. You have to shell out more to purchase learning-kit books for pre-school children.

These kit books will draw a 5 per cent goods and services tax (GST) rate, unlike other children’s drawing books that are exempt from the indirect tax, ruled the Authority for Advance Rulings (AAR) in Madhya Pradesh.

Books in general draw no GST.

The case relates to an advance ruling sought by Riseom Solutions Pvt Ltd on the GST rates that should be imposed on its product — learning kit box or kit book — which it sold as “Class Monitor Home Learning Kit”.

These kits are children’s picture books in loose sheets. The company argued such kit boxes and books were educational home-learning tools for preschoolers and were aimed to develop skills that are linguistic, logical, sensory and motor, and cognitive, and creativity.

It said since the main content of the kit box/book was images and pictures, which are the principal tool in imparting skills to children, it should be classified under HSN Code 4903. This code is applicable to children’s books on drawing, pictures, or colouring, and GST does not apply to them.

The AAR agreed at the outset the kit box/book should be covered under heading 4903. However, it observed it was neither in book form, nor bound. Therefore, the kit should not be covered under heading 4903.

The company, however, said all the sheets were part of a kit box/book, which is suitable for binding. However, if the company bound them, their utility would be reduced.

It said the users of such a kit box/book were children, who, in spite of being guided by their parents, would not be able to use it in bound form.

The contents of the kit book are in the form of separate sheets (topic-wise) so as to make it easy to carry and handle them when a child has to be taught a topic.

“If these separate sheets are bound (though that can be easily done), it would become very heavy for a kid to use and to learn, develop skills...,” the company said.

However, the authority said the kit box should be classifiable under the HSN heading of 4901, which is for printed books, brochures, leaflets etc, whether or not in single sheets. Besides, the kit box not only covers pictures but also texts, observed the authority.

Part of the category — 4901 — draws nil GST, but part of it applicable to pamphlets, booklets, brochures, and leaflets draws 5 per cent. The authority ordered the kit box to be put in the latter category.

Harpreet Singh, partner, indirect taxes, KPMG in India, said: “The ruling authority has agreed that on a plain reading of the tariff entries, the product merits classification under entry 4903. However, on deeper examination, it merits a different classification (4901), thus reiterating the need for a proper evaluation of all classification principles before applying the GST rate on any product.”

The classification of items under GST to know their tax rates has been a matter of dispute ever since the tax was rolled out in July 2017. The classification is done on the basis of HSN codes.