Circular No. 11/11/2017-GST dated 20th October 2017 has been issued to clarify as follows:-
- In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher / person owning rights on intangible inputs and physical inputs like paper, ink, etc. belong to printing press, it would constitute as supply of service.
- In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, it will be considered as supply of goods.
Entry no. 119 of Notification No.2/2017-Central Tax (Rate) dated 28th June, 2017 exempts the Printed books, including Braille books. However, the above referred circular has clarified that where the content is supplied by the author, it will be deemed as supply of service. In this regard, it is worthwhile to mention here that in case of books, content is always supplied by the author or person owning rights on intangible inputs.
Further, in case of books, the author approaches the publication house which in turn gets the same printed from a printing press. The amount from sale of books is being received by the publication house, out of which, royalty is being paid to the author. In the entire transaction, the tax is levied as follows in GST regime:-
- The printing press shall be paying the tax on the consideration received by it for printing the books by treating it as supply of services. As the outward supply is taxable, it will be able to avail the ITC which can be used for payment of tax.
- The publication house will suffer the incidence of tax charged by the printing press.
However, it will not be able to avail the ITC as its outward supply namely – supply of books is exempted by virtue of entry no. 119 of Notification no. 2/2017-CT(Rate) dated 28.6.2017.
- The author receives the royalty, the tax on which is being paid by the publication house under reverse charge mechanism by virtue of entry no. 9 of Notification No. 13/2017- Central Tax (Rate).
Therefore, tax is being levied at each stage but the ITC is being blocked at various stages.
Also, the benefit of inverted duty structure is not available in case of exempted supplies. As reported by Economic times, a matter for refund of inverted duty structure in case of exempted supplies for publishers is pending before the Delhi High
Court. Further, it has also been reported in the same article of Economic Times that the Meerut Publishers’ Association filed the writ petition on September 11 against the Centre on the issue of reverse charge mechanism on royalty.
With all the issues pending with High Court, one thing is clear that there is lot of unrest amongst the authors, freelancers and publication houses. This is genuine also as blockage of ITC has resulted into increase in cost of books inspite of fact that there is no tax on the sale of books. Until any further clarification or judgment of High Court in this regard, the increased cost of books will further lower down the craze of books in this digital era.
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