Page 11 - Banking Finance June 2019

GST UPDATE

Companies pitch for GST Delhi Apex Court excludes Hindi vocab practice books
rate cut as Modi govt from GST
'Work book' and 'exercise book' are frequently used in schools in an alternative
takes charge second time
way. However, they are different in terms
Companies dealing in the sectors of
of tax, and recently a Delhi High Court or-
durables, au-
der has further clarified on this difference.
t o m o b i l e s
A Division Bench of Justice Rekha Palli and
and real es-
Justice S Muralidhar and has said Hindi vo-
tate have
cabulary practice books Sulekh Sarita (Parts
been lobbying
I to V) fall under the category of printed
hard for a
books and therefore "fully exempted from
goods and services tax (GST) cut as
GST" in its ruling on a petition filed by Sonka
the Narendra Modi-led National
Publication. Exercise books inclusive notebooks, graph books and laboratory books
Democratic Alliance takes charge
are applicable for 12 percent GST, while printed books inclusive the ones in
second term.
Braille fall under the category of zero percent tax.
Durable firms said the issue of
Previously, Sonka had approached the Authority for Advance Rulings (AAR), which
rationalising the tax rate of products
stated that printed work books fall under the exercise books, and hence are
such as air conditioners and larger
applicable for 12 percent GST.
television sets, which sit in the 28
per cent tax bracket, has been on A work book is distinguished from an exercise book as the former contains ques-
the government's table for long. tions or assignments within the space given for writing the answers, while the
"Since July last year, when most ap- latter contains printed text with space for copying it manually.
pliance and electronic products were
As per the High Court, the question arises as to whether the book in question
moved from 28 per cent to 18 per
merely helps children in improving their handwriting by providing them with space
cent, companies have been asking
for copying from a given text, or whether it poses questions for the children to
for ACs and larger TVs (above 32
answer, which the teacher can then evaluate.
inches) to be shifted too in terms of
The books which are printed and sold by Sonka Publication fall under the latter
the GST rate," said Kamal Nandi,
category - they evaluate knowledge of children and ask questions - and hence
business head and executive vice-
cannot be termed as mere exercise books, said the court. It also observed that
president, Godrej Appliances, who is
the petitioner's books are not 'exercise books' as understood by the trade. Those
also the president of the Consumer
are simply bound volumes of blank pages which may contain lines to facilitate
Electronics and Appliances Manufac-
writing, it said.
turers Association (CEAMA).
Remarking on the decision, Waman Parkhi, Partner at KPMG, said that the in-
"ACs and TVs are not luxury items,
stance is one of the rare court rulings where an AAR ruling has been overruled.
but essential goods. It doesn't make
"The High Court has rightly looked at the principle purpose of the book, which
sense therefore to put them in the
is to enhance the child's knowledge, and then determined the classification,"
highest tax bracket. A tax cut will
he said.
mean that prices will come down,
boosting demand," he said. A 10 "The basic premise of GST is to create fair and unambiguous tax categories in
percentage point decline in the GST which items of basic importance such as education are exempted from tax to
rate on ACs will see a net reduction achieve macro-level benefits" said Rajat Mohan, Partner at AMRG & Associ-
of 7-8 per cent in terms of prices, ates.
sector experts said, which is a relief "The AAR ruling imposed a 12 per cent tax on the sale of educational textbooks
for consumers at a time when new based on technical jargon. This revenue-biased ruling is now struck down by the
energy labelling norms have pushed Delhi High Court on the grounds that these books of Sulekha Sarita are 'practice
up prices by at least Rs 5,000 per books' used to facilitate the evaluation of a child's knowledge and are to be
unit. regarded as 'printed books' which are fully exempt from GST," he added.

BANKING FINANCE | JUNE | 2019 | 11