GST Classification of books as Printed Books or Exercise Books-emphasis is on a functional characteristics, the purpose it serves – High Court
ABCAUS Case Law Citation:
ABCAUS 2913 (2019) (05) HC
Important Case Laws Cited/relied upon by the parties
The Central Press Private Limited v. Union of India
C.C. (General), New Delhi v. Gujarat Perstorp Electronics Ltd. 2005 (186) ELT 532 (SC)
The Writ Petitioner had filed an application for advancing ruling seeking a clarification whether the books published by it were printed books classifiable as Printed Books under HSN 4901 to 10 or as “Exercise Books‟ under HSN 4820. Another issue raised by the Petitioner was whether a person exclusively supplying goods that are wholly exempted under tax is required to be registered under the GST Act.
If the books were classified under HSN 4901, as contended by the Petitioner, then they would be completely exempt from tax in terms of the CGST Act as well as Delhi GST Act. If they were to be considered as “Exercise Books‟ classified under HSN 4820, as contended by the Respondents, then they are subject to 6% tax.
The Authority for Advancing Ruling (AAR) passed the order holding that the said books printed and sold by the Petitioner, were classifiable as “Exercise Books” under HSN 4820. The AAR also held the Petitioner had to get itself registered if it had GST liability under Reverse Charge Mechanism (“RCM‟) i.e. under Section 24 (iii) of the CGST Act notwithstanding that under Section 23 (i) (a), it may not be liable to pay any tax.
The reasoning of the AAR for holding that the Petitioner’s books were classifiable under HSN 4820 proceeds as under:
(i) Heading 49.01 generally covers “textual reading material/books including text-books, catalogues, prayer books etc. It specifically covers “educational workbooks or writing books”. Heading 49.03 generally covers “children’s picture, drawing or colouring books wherein pictures form the principal interest in the books‟. Heading 48.20 generally covers “stationery books‟. Exercise books that contain” simple sheets with printed lines or may even have printed examples of handwriting for copying by the students‟ also covered Heading 48.20.
(ii) The main feature which differentiates “work books” of Heading 49.01 from “exercise books‟ of Heading 48.20 is that “the work books of Heading 49.01 contained questions or exercise within the space given for writing the answers whereas, the exercise books under Heading 48.20 contained printed text with space for copying manually.
(iii) An examination of the books printed and sold by the Petitioner revealed that “only in very few pages, any printed exercise or questions is given. Hence, in these books, the primary use is writing and printing is incidental”. Further since none of the books contained any pages with “children’s picture‟, drawing or colouring matter‟, classification of any of them under heading 49.03 is not possible. Therefore, the goods were to be correctly classified under HSN 4820.
The Hon’ble High Court observed that the book had a contents page which explained the broad features of the book. The first part contains practice exercises where the student is expected to copy the printed text in the lines given immediately below. But, that would be a very limited way of looking at the book as a whole. In fact, there were many portions of the book subsequently where a student was expected to answer questions. The student was expected to write down the meaning of Hindi words. The student was expected to write a short essay on a given aspect.
In other words, the student was not merely copying from a printed text. Here the listening and retentive abilities of the student were being tested.
The Hon’ble High Court did not concur with the assessment made by the AAR that “only in very few pages, any printed exercise or questions is given.” The Hon’ble High Court opined that an educational text is like a handholding exercise for a child. While in the first few pages, it may appear that the child was asked to mechanically reproduce from the printed text, as the course progressed, the child was encouraged to think on his or her own. This was what precisely the said “work book‟, or a “practice book‟ does.
The Hon’ble High Court was of the view that at the end of the course, by using these books, the attempt was to enhance the educational value addition as far as the child was concerned. The attempt was to help the child think on his own and to enable the teacher to evaluate the child’s output. By no means could it be said that these books were for enabling a child to merely copy words from a printed text in order to improve his or her own handwriting.
Therefore, the Hon’ble High Court opined that the emphasis is on a “functional characteristics‟ of a book. In other words, the Court must ask what purpose will the book serve?
“These books are not “exercise books‟ as understood by the trade” said the Court.
Consequently, the Hon’ble High Court held that in the present case, the books published and sold by the Petitioner were classifiable under HSN 49.01 and not HSN 48.02. In terms of Notification No.2/2017-Central Tax (Trade) dated 28th June, 2017 i.e. Entry No.119 thereunder, such goods classifiable under HSN 49.01 i.e. “printed books, including Braille books‟ are wholly exempted from tax.