Printing Service Predominant over Supply of Goods: Kerala HC upholds 18% GST on Digital Photo Books [Read Order]

In a recent ruling, the Kerala High Court dismissed a batch of writ petitions filed by various digital photo printing firms, holding that their service of printing customer-supplied digital content onto paper is a composite supply where the predominant element is the service of printing, taxable at 18% under GST, not 12% as claimed by the petitioners.

The petitioners, including M/s Stark Photo Book and Indot Color World, are engaged in offset printing services. They argued that their activity of printing photographs, brochures, and other materials, using paper and ink supplied by them, should be classified as a supply of goods under HSN Code 4911, attracting a 12% GST rate. They relied on various government circulars and an advance ruling to support their claim.

The Revenue, however, initiated proceedings under Section 74 of theCentral Goods and Service Taax (CGST) Act,2017 alleging misclassification. They contended that the service falls under SAC 998386 for 'photographic and videographic processing services', which attracts an 18% tax rate. The Revenue's position was supported by an advance ruling from the Kerala Authority for Advance Ruling.

A single bench of Justice Ziyad Rahman A.A., after analyzing the statutory provisions of the CGST Act, observed that the transaction involves a composite supply of both goods i.e., paper and ink and services ies, printing. The Court applied the 'principal supply' test, noting that the title to the content (photographs, etc.) never passes to the printer; it remains with the customer. The paper is merely a means to effect the service of printing. Therefore, the service of printing is the predominant element of the supply.

The Court distinguished between a supply of printed materials goods under HSN Code 4911 and a service of printing content supplied by a customer. It rejected the petitioners' argument that the absence of 'negatives' in digital printing excluded them from SAC 998386, pointing out that the classification is inclusive and specifically mentions 'colour printing of images from... digital media'.

Consequently, the High Court held that the activity falls under SAC 998386 and is taxable at 18%. While dismissing the writ petitions, the Court clarified that the petitioners could pursue their statutory remedies of appeal, and the period from the filing of the petitions till the judgment would be excluded for the purpose of computing the limitation period.

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