Bundled contracts for a single price would be taxable as a mixed supply [AAR- WEST BENGAL]

AAR gave an important ruling dated 24th December, 2019 regarding taxability of intermediary services in case of Infobase Services (P). Ltd. [2019] 112 taxmann.com 335 (AAR- WEST BENGAL) which is discussed as below:

Facts of the Case

  • The Applicant enters into an agreement with the Club for marketing of advertisement space for the Directory. The Applicant will have to finance the project cost of printing the Directory from the proceeds received from sale of space for advertisements.
  • If it exceeds the final project cost for printing, the Applicant will gain 75% of the differential amount. If it does not cover the cost of such printing, the Applicant will have to bear the losses to that extent. The Applicant will raise tax invoice on the Club for the printing service. However, the Club will also raise invoice on the Applicant for the amount by which the proceeds from sale of advertisement space falls short of the cost of printing.
  • The Club will fix the specifications and rates for booking the advertisement space. The Applicant will procure the advertisements and issue Proforma Invoice with applicable GST in the Club’s name on confirmation of the booking space. Based on the Proforma Invoice, the Club will issue the Tax Invoice after receipt of payment from the advertisers. Clearly, the Applicant, in addition to supplying printing service, is also acting as an intermediary on behalf of the Club for selling space for advertisements.

Issue Involved

  • Whether its procurement of advertisements for the Directory is classifiable as selling of space for advertisement in print media?

Observation/Judgment

  • AAR observed that applicant is making a bundled supply to the Club of printing service and intermediary service for selling space for advertisement on behalf of the Club and charging a single price for the bundle as the project cost for printing. The two services are not naturally bundled or supplied in conjunction with each other in the ordinary course of business and supply by a taxable person of a bundle of services at a single price, if it does not constitute a composite supply, shall be a mixed supply.
  • Selling of space for advertisement, when made as an intermediary, is classifiable under SAC 998362, which excludes sale of advertising space in print media (SAC 998363) and is taxable @ 18% and service by way of printing (SAC 998912) where the physical inputs are supplied by the printer is taxable @ 12%. This being a mixed supply would be chargeable at the highest rate which is 18% having an SAC of 9983.

Please click here for Ruling

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