GST on Printing of Customer-Supplied Digital Content – Classified as Service under SAC 998386 (18%) and Not as Goods under HSN 4911; Composite Supply with Principal Supply as Service

GST on Printing of Customer-Supplied Digital Content – Classified as Service under SAC 998386 (18%) and Not as Goods under HSN 4911; Composite Supply with Principal Supply as Service

Facts of the Case

• The petitioners are partnership firms running offset printing presses, engaged in printing and sales of brochures, books, magazines, posters, leaflets, photo books, notices, etc.
• Customers supply content as digital files or videos, and the petitioners print and supply the final products using their own materials (ink, paper, etc.).
• Petitioners classified their supply under HSN Code 4911, attracting 12% GST, treating the activity as a composite supply with the principal supply being goods.
• Tax authorities, after inspection, initiated proceedings under Section 74 of the CGST Act, alleging misclassification and asserting that the activity falls under SAC 998386 (photographic and videographic processing services), attracting 18% GST.
• Objections filed by the petitioners were rejected, and assessment orders were passed.
• Petitioners approached the High Court under Article 226, challenging the assessment orders, citing conflicting advance rulings and departmental clarifications.
• Respondents filed counter affidavits, denying the petitioners’ claims and supporting the assessment orders.

Contentions of the Parties

• Petitioners:
  • Their activity is a composite supply, with the principal supply being goods, taxable at 12% under HSN Code 4911.
  • Relied on departmental clarifications (Ext.P1, P2 series) and advance rulings supporting classification under HSN 4911.
  • Argued that their process does not involve developing negatives, distinguishing it from services under SAC 998386.
• Respondents:
  • The supply is a composite supply with the predominant element being a service, taxable at 18% under SAC 998386.
  • Contended that the activity falls within photographic and videographic processing services, as per the statutory scheme and departmental clarifications.

Issues

• Whether the printing activity undertaken by the petitioners, where content is supplied by customers in digital form, is taxable at 12% under HSN Code 4911 as a supply of goods, or at 18% under SAC 998386 as a supply of services.
• Whether the activity constitutes a composite supply, and if so, what is the principal supply for the purpose of determining the applicable GST rate.
• Whether the assessment orders passed under Section 74 of the CGST Act are liable to be interfered with by the High Court in exercise of its writ jurisdiction.

Decision

A. Statutory Framework and Definitions

• The Court outlined the relevant statutory provisions: Section 2(30) (composite supply), Section 2(74) (mixed supply), Section 2(90) (principal supply), Section 8 (tax liability on composite and mixed supply), and Schedule II of the CGST Act, 2017, as well as the relevant HSN and SAC codes. (p7–13)
• HSN Code 4911 covers “other printed matter, including printed pictures and photographs,” while SAC 998386 covers “photographic and videographic processing services,” including “colour printing of images from film or digital media.” (p12–13)

B. Nature of the Petitioners’ Activity and Composite Supply Analysis

• The petitioners’ activity involves both supply of goods (ink, paper) and supply of services (printing content supplied by customers in digital format). (p14)
• Such activity constitutes a composite supply under Section 2(30) of the CGST Act. (p14)
• As per Section 8, tax liability on a composite supply is determined by the principal supply. (p14)
• The principal supply is the supply of services (printing of customer-supplied content), while the supply of goods (paper, ink) is ancillary. (p15)
• No transfer of title in goods occurs from the customers to the petitioners; the title over the photographs remains with the customers. The paper used is merely a tool for providing the printing service. (p15)
• The final output (printed photographs on paper) does not amount to a transfer of goods; the predominant element is the service of printing. (p15)

C. Classification under HSN 4911 vs. SAC 998386

• HSN Code 4911 refers to supply of goods in the form of printed materials, while SAC 998386 refers to photographic and videographic processing services, including printing of images from digital media. (p16)
• The Court noted a “subtle difference”: HSN 4911 applies to supply of goods where the content is owned by the supplier; SAC 998386 applies where the service is printing customer-supplied content. (p16)
• The petitioners’ attempt to distinguish their activity from SAC 998386 (on the ground that their process does not involve developing negatives) was rejected. The Court held that SAC 998386 is an inclusive classification, specifically mentioning “colour printing of images from film or digital media,” which covers digital printing without negatives. (p17)

D. Relevance of Departmental Clarifications and Advance Rulings

• Ext.P1 (clarification under KVAT Act) was found irrelevant, as the CGST Act has a different scheme. (p18)
• Ext.P2 (FAQ) was interpreted as applying to supply of printed material where the content is owned by the supplier, not to printing services based on customer-supplied content. (p18)
• The Court drew a distinction between supply of goods (printed material with content from the supplier) and supply of services (printing content supplied by the customer). (p18)
• Ext.P8 (Advance Ruling dated 12.4.2019) was relied upon, which held that printing work of images from digital media is covered under SAC 998386 and taxable at 18%. (p19)

E. Application of Law to Facts and Final Determination

• The Court found that the petitioners’ activities amount to composite supply, with the predominant element being supply of services, falling under SAC 998386 (photographic and videographic processing services), attracting 18% GST. (p19)
• No justifiable reason was found to interfere with the assessment orders or the proceedings initiated under Section 74 of the CGST Act. (p20)
• The Court clarified that the petitioners are at liberty to pursue statutory remedies, and the period from the filing of the writ petitions to the receipt of the judgment shall be excluded for the purpose of limitation in pursuing such remedies. (p20)

Conclusion

The Court concluded that the printing activities of the petitioners, where content is supplied by customers in digital form, constitute a composite supply with the principal supply being a service under SAC 998386, attracting 18% GST. The assessment orders classifying the activity as a service and levying tax at 18% were upheld, and the writ petitions were dismissed, with liberty to the petitioners to pursue statutory remedies and exclusion of the limitation period for such remedies.

Disposition

The writ petitions are dismissed. The assessment orders are upheld. The petitioners are granted liberty to pursue statutory remedies, with the period from the filing of the writ petitions to the receipt of the judgment excluded for the purpose of limitation.

Source: Stark Photo Book v. Assistant Commissioner (Intelligence) Special Squad No. IV and Ors., (2025) taxcode.in 783 HC