THE AUTHORITY ON ADVANCE RULINGS

IN KARNATAKA

GOODS AND SERVICES TAX

VANIJYA THERIGE KARYALAYA, KALIDASA ROAD

GANDHINAGAR, BENGALURU - 560 009

ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS & SERVICES TAX ACT, 2017 AND UNDER 98(4) OF THE KARNATAKA GOODS & SERVICES TAX ACT, 2017

1. M/s Informatics Publishing Limited, (called as the 'Applicant' hereinafter), having GSTIN number 29AACCT4896Q1Z8, has filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 and Section 97 of the KGST Act, 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.

2. The Applicant is a Company and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the following question:

Whether the supply of services in the nature of subscription to the J-Gate by the educational institutions is eligible for exemption from GST under Notification No.2/2018- Central Tax (Rate)?

3. The applicant furnishes some facts relevant to the stated activity:

a. The applicant states that they are in the business of supplying online journals. They have a portal called J-Gate, which is a platform for searching various educational journals. Today it qualifies to be the world's largest database of journal articles - indexing metadata of over 56 million journal articles from 50000 + journals of 13100+ publishers. J-Gate includes full text access to over 25000 journals.

b. The applicant further states that the Government has exempted the supply of online journals to educational institutions vide notification number 2/2018- Central Tax (Rate) dated 25.02.2018. The relevant entry in the notification is as under

(v) supply of online educational journals and periodicals

"provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of, -

(i) Pre-school education and education upto higher secondary school or equivalent; or

(ii) Education as a part of an approved vocational educational course.

c. J-Gate, being the platform for various scholarly and scientific journals, educational institutions subscribe to J-Gate, which will enable them to access hundreds and thousands of educational journals.

d. The applicant states that J-Gate platform indexes millions of articles from several thousand online journals of interest to educational institutions. It also aggregates several of these online journals on its platform. The journals are updated on a monthly or bi-monthly or quarterly basis.

4. The applicant states that he understands that by virtue of Notification No.2/2018- Central tax (Rate) dated 25.01.2018; the supply of online journals to an educational institution is exempt from the payment of tax under the GST Act.

4.1 J-Gate can be visualized as a service similar to Tax India Online (TIOL) or GST Law Times: a weekly journal of Goods and Service Tax in print. While TIOL aggregates and indexes case laws, articles, etc. in the area of direct and indirect taxes, J-Gate indexes and aggregates articles from the peer-reveiewd scholarly journals in all discipline sets such as Physical science and Life Sciences, engineering and Technology, Health Sciences, Economics, Laws, Social Sciences, etc. required by higher education institutions. If TIOL and GST Law Times are considered as journals, the applicant feels that J-Gate should also be considered as an online journal.

4.2 The applicant charges the subscribing institutions an annual subscription fee, depending on the disciplines from which the journals are required to be accessed.

4.3 The applicant states that OIDAR is defined in Section 2(17) of the IGST Act, 2017. Even though providing online journal or periodicals through J-Gate will fall under "online information and database access or retrieval services", the Government has decided to exempt the service of "supply of online journals or periodicals" to the education sector. The Government has picked up one of the service from the host of services listed under "online database service" and has given the exemption for journals and periodicals provided through online to the educational institutions. Since the exemption is available when the service is provided to the educational sector, the applicant is of the view that as an aggregated access to collection of journals should also be exempt from GST when subscribed by educational institutions.

4.4 The applicant states that as per the Oxford Online Dictionary, the meaning of journal is given as under:

"a newspaper or magazine that deals with a particular subject or professional activity".

4.5 In view of the above explanations, the applicant is of the view that J-Gate is a journal, and hence the subscription fee collected from the qualified educational institutions should be exempted from GST by virtue of Notification No.2/2018.

5. FINDINGS & DISCUSSION:

We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by Sri. Dayananda, CA, during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act.

5.1 The transaction of the applicant is verified and found that the applicant is only providing access to the articles published in various journals and papers to its subscribers. It itself is not publishing any online journal, but only maintaining a database of links to all the journals. It is seen that the links to the articles are maintained in a metadata form and the subscriber when accesses to the platform can access to the individual article published in any of the journal available in the platform after reading the catalogue of the articles. The articles are catalogued and made available. Some of the articles are available for full view while some are only available in the catalogued form and the subscriber needs to subscribe the individual journal site to gain access to the full article. The applicant is collecting the subscription fee which is nothing but the fee charged to gain access to the data available in the database and to download the articles or information. This is an online information and database access and retrieval service provided by the applicant to its subscriber and not a sale or supply of online journals.

5.2 In their application at serial number 16, the applicant describes the services through J-Gate platform as follows:

(a) J-Gate platform indexes millions of articles from several thousand online journals of interest to educational institutes

(b) J-Gate also aggregates several of these online journals on its platform.

The aforementioned activities clearly indicate that the applicant carries out the aggregation of various articles from various journals and creates a database for reference. They themselves do not publish any journals. So their activity is in the domain of aggregation and supply of educational material which has been published in journals by other persons.

5.3 Further during the hearing the applicant submitted some more facts in writing. One relevant and important information provided by the applicant is as follows:

The portal has around 25000 full-fledged journals and metadata of around 25000 journals. Metadata refers to the journals which have the gist of the articles but not the full-fledged information. If a subscriber wants to read the full article, the subscriber has to pay to the publisher and subscribe to the same. However the metadata itself will generally be sufficient for any reader to understand the subject matter.

Here it is clear that in respect of the metadata the educational institutes have to further pay to the publishers to get access to the full text of articles. The application only acts as the gateway to the data. They are not the owners of the data.

5.4 The facts enumerated in para 5.2 and 5.3 above indicate that the nature of the activity undertaken by the applicant relates to compilation of a certain prepared data at one place. They are not involved in the creation of the journals. In respect of the metadata they are only the gateway to the journals. In this context what the applicant supplies is educational material/information already prepared by someone else. They act only as a platform for supply of information or as an aggregator of information in case of metadata.

5.5 In view of the above, the transaction is not covered under sub-item (v) of item (b) of serial no.66 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification No.2/2018- Central Tax (Rate) dated 25.01.2018 which reads as under

"66. Services provided to an educational institution by way of -(v) supply of online educational journals and periodicals."

5.6 Instead, the transaction of supply of information by the applicant is more appropriately covered under the Heading 9984, Telecommunications, broadcasting and information supply services', under the Group 99843 and Service Accounting Code of 998431, the description of which is "online text based information such as online books, newspapers, periodicals,, directories and the like". The explanatory notes to the scheme of classification of services refers. The articles are covered under the items "and the like" and hence the SAC applicable for the providing access to the portal is 998431. This service is liable to tax at 9% CGST under the entry no.22 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

5.7 For the same reasons, the transaction is liable to tax at 9% under the KGST Act as it is covered by entry no. 22 of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017.

6. In view of the foregoing, we rule as follows

RULING

The providing of access to the online content by the applicant to their users is covered under SAC 998431 and liable to tax at 9% CGST under the entry no.22 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and at 9% under the KGST Act as it is covered by entry no. 22 of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017.

AUTHORITY FOR Advance Ruling No. KAR ADRG ROM 02/2021 Dated 30th July, 2021

THE AUTHORITY FOR ADVANCE RULING

IN KARNATAKA

GOODS AND SERVICES TAX

VANIJYA THERIGE KARYALAYA, KALIDASA ROAD

GANDHINAGAR, BENGALURU - 560009

PROCEDINGS UNDER SECTION 102 OF THE CGST ACT, 2017

& UNDER SECTION 102 OF THE KGST ACT, 2017

1. M/s. Informatics Publishing Limited., (called as the 'Applicant' hereinafter) No. 194, R.V.Road, Basavanagudi, Bengaluru 560004, having GSTIN 29AACCT4896Q1Z8 have filed an application for rectification of mistake (ROM), under Section 102 of CGST/KGST Act, 2017, alleging an error apparent on the face of the record in the Order No.74/2019 dated 23.09.2019 of this authority.

2. The applicant filed the instant application, for rectification of alleged error apparent on record, in the aforesaid Order No.74/2019 dated 23.09.2019, that the authority has not addressed the issues raised by the applicant.

3. The applicant submitted that they had filed two applications for advance ruling; one about the online journal provided through their portal called J Gate and another application about the import of online journal through online and sale of the same to the eligible educational institutions. The authority, in the impugned ruling, linked the matter pertaining to the J Gate, whereas the subject matter was totally different. The applicant had sought advance ruling on the eligibility of input service tax credit, on the import of service of online journal for supplying the same to the eligible educational institutions and hence the applicability of Notification No.2/2018-Central Tax (Rate) dated 25.01.2018 is not the subject matter. Thus the applicant filed the instant application for Rectification of the advance ruling order No.74/2019 dated 23.09.2019.

4. Sri K. Dayananda, Chartered Accountant & authorized representative of the applicant appeared for personal hearing proceedings held on 28.01.2021 before this authority and reiterated their submissions made in the ROM application.

5. DISCUSSION & FINDINGS

5.1 We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by them during the personal hearing sought for rectification of mistake.

5.2 We examined the application filed by the applicant for advance ruling as well as the Order No.74/2019 dated 23.09.2019 wherein it was ruled as under :-

" The providing of access to the online content by the applicant to his users is covered under SAC 998431 and is liable to tax at 9% CGST under the entry no.22 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017 and at 9% under the KGST Act as it is covered by entry no. 22 of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017. Since the transaction is not exempt, there is not restriction on input tax credit claims as per Section 17(1) or 17(2) of the CGST Act/ SGST Act/IGST Act"

We observe that the aforesaid ruling Order No.74/2019 dated 23.09.2019 did not address the question in the application as the same contained the information pertains to another application, filed by the applicant and hence the instant application for rectification is being allowed.

5.3 The applicant engaged in the supply of online journals, for which they import various online journals from the foreign suppliers, on payment of IGST, on the said import services, under Reverse Charge Mechanism and supply the same mainly to the educational institutions, Notification No.2/2018-Central Tax (Rate) dated 25.01.2018 vide entry number 66 (b) (v) exempts services provided to an educational institution by way of supply of online educational journals or periodicals, provided that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of,-

(i) pre-school education and education up to higher secondary school or equivalent; or

(ii) education as a part of an approved vocational education course.

In view of the above, the supply of educational journals or periodicals to the educational institution is exempt subject to the above conditions supra i.e. the said exemption shall not apply to the educational institutions providing services by way of pre-school education and education up to higher secondary school or equivalent or education as a part of an approved vocational education course.

5.4 The applicant sought advance ruling in respect of the following question,-

"Whether input tax credit is available when the online educational journals and periodicals are supplied to the Educational institutions other than to preschool and higher secondary school or equivalent, which is exempt by virtue of Notification No.2/2018-Central Tax (Rate) dated 25.01.2018?

5.5 Therefore the question before us to decide is whether the input tax credit is available to the applicant when their outward supply is exempted. The applicant contends that as per Section 17(1), 17(2) of CGST Act 2017 read with Rule 42 of CGST Rules 2017, input tax credit, attributable to exempt supply, is not available, but their supply, made to the eligible educational institution is not an exempt supply for the purpose of Section 17(1), 17(2) of CGST Act 2017 read with Rule 42 of CGST Rules 2017 and hence the input tax credit is available to them.

5.6 The applicant, in substation of their argument, submits that the aforesaid exemption is applicable only to the 'eligible educational institution' and hence is not exempt "absolutely" and there by it is a conditional exemption i.e. neither the entire service is fully exempted nor it is applicable to all, but only to a particular segment for educational purpose only. Further "exempt supply", in terms of Section 2(47) of CGST Act 2017, means supply of any goods or services or both which attracts NIL rate of tax or which may be wholly exempt from tax under Section 11 of the CGST Act 2017 or under Section 6 of the IGST Act 2017 and includes non-taxable supply. The exemption in terms of Notification 2/2018 supra is not wholly exempted under Section 11, but a conditional exemption. In general, the impugned supply is a taxable one & the exemption is applicable to only certain segment of buyers. Therefore the exemption is conditional one & hence the provisions of Section 17(1), 17(2) of CGST Act 2017 read with Rule 42 of CGST Rules 2017 are not applicable to the instant case and thus the input tax credit is available to them. The applicant relied upon the case laws pertain to the erstwhile Cenvat Credit Rules.

5.7 In this regard, we invite reference to Section 17(1), 17(2) of CGST Act 2017 and Rule 42 of CGST Rules 2017, which are as under:-

Section 2(47) of CGST Act 2017 - "exempt supply" means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes nontaxable supply.

Section 17 of the CGST Act 2017 - Apportionment of credit and blocked credits.-

(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Rule 42 of CGST Rules 2017 determines the manner of input tax credit in respect of inputs or input services and reversal thereof and specifically Rule 42(1) is as under:

(1) The input tax credit in respect of inputs or input services, which attract the provisions of sub-section (1) or sub-section (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies..

5.8 It could be seen from the definition of "exempt supply" that the following supplies of any goods or services or both are covered under exempt supply.

a) Supplies which attract Nil rate of duty or

b) Supplies which may be fully exempt under Section 11 of the CGST Act 2017 or under Section 6 of the IGST Act 2017.

c) All non-taxable supplies.

In the instant case, it is an admitted fact that the impugned exemption under Notification No.2/2018 supra is issued under Section 11 of the CGST Act 2017. The exemption is in full only when supplied to specific buyers. Further in case of conditional exemptions, the relevant notification contains the prescribed conditions. In the instant case the Notification No.2/2018-Central Tax (Rate) dated 25.01.2018 does not contain any conditions and hence it is not a conditional exemption notification.

5.9 It is pertinent to mention here that the applicant sought advance ruling as to whether the input tax credit is available when their outward supply is exempted in terms of Notification No.2/2018 supra. The exemption under the said notification is in full only and no tax is liable to be paid by the applicant. Thus the exemption is on the whole duty but not partial / conditional and therefore the impugned supply is wholly exempted. Hence the input tax credit on such supplies is not available to the applicant, in terms of Section 17(1), 17(2) of CGST Act 2017 and Rule 42 of CGST Rules 2017, as the said supply is wholly exempted in terms of the notification supra.

6. In view of the foregoing, we pass the following

RULING

The input tax credit is not available to the applicant, on the supplies of the online educational journals or periodicals to the eligible educational institutions under entry number 66 (b) (v) of the Notification No.2/2018-Central Tax (Rate) dated 25.01.2018, in accordance with Section 17(1), 17(2) of CGST Act 2017 and Rule 42 of CGST Rules 2017.