The Delhi High Court has clarified that a book has to be judged by its functional characteristics to see if it is a 'work book' that test child's knowledge, in which case it will be fully exempt from GST, or is it merely an 'exercise book' containing lines to facilitate writing or manual copying of a text, in which case it will be subject to GST.
A Bench of Justice S Muralidhar and Justice Rekha Palli said so while holding that 'Sulekh Sarita Parts I to V' are printed books and not mere exercise books as they have large portion comprising questions which test child's knowledge and enable evaluation of their understanding and are therefore printed books which along with Braille Books are classifiable under HSN 4901 and are fully exempted from tax.
The court's order came on an appeal moved by Sonka Publications, which publishes and sells Sulekh Sarita, against the order of Authority for Advance Ruling (AAR). The AAR had held the books to be exercise books under the Code HSN 4820 and therefore liable to CGST as well as Delhi GST on the ground that it contained very few pages with any printed exercise or questions and its primary use was for writing.
In common parlance, exercise books are more akin to handwriting "notebooks" for practising rather than "work books" containing printed exercise and classified under HSN 4820 of erstwhile CETA which covered registers, notebooks, diaries, letter pads etc. where printing is incidental to their primary use i.e. writing.
The high court differed from the view taken by the AAR as it examined the contents of the book.
The first part, ,it noted, contains practice exercises where the student is expected to copy the printed text in the lines given immediately below. But, that would be a very limited way of looking at the book as a whole. In fact, there are many portions of the book subsequently where a student is expected to answer questions. The student is expected to write down the meaning of Hindi words. The student is expected to write a short essay on a given aspect.
"It appears from reading the book Sulekh Sarita Part V (and this holds good for the other Parts I to IV) as a whole that while in the initial phases, the teacher is expected to guide the student and the book is used as a tool in that endeavour, there are substantial portions of the book where after completing that phase, the student is asked to write words of his or her own…In other words, the student is not merely copying from a printed text. Here the listening and retentive abilities of the student are being tested," noted the bench.
It also noted that the book had pages where students were supposed to join two Hindi words to make another Hindi word.
"This Court, therefore, is not persuaded to concur with the assessment made by the AAR of the above book that "only in very few pages, any printed exercise or questions is given." An educational text is like a handholding exercise for a child. While in the first few pages, it may appear that the child is asked to mechanically reproduce from the printed text, as the course progresses, the child is encouraged to think on his or her own. This is what precisely this 'work book', or as the Court would like to rephrase it, this 'practice book' does. At the end of the course, by using these books, the attempt is to enhance the educational value addition as far as the child is concerned. The attempt is to help the child think on his own and to enable the teacher to evaluate the child's output. By no means can it be said that these books are for enabling a child to merely copy words from a printed text in order to improve his or her own handwriting," said the high court.
Relying on the Supreme Court decision in C.C. (General), New Delhi v. Gujarat Perstorp Electronics Ltd wherein it was observed that one must refer not only to the physical, but also functional characteristic of "book", the high court said, "the emphasis was on a 'functional characteristics' of a book. In other words, the Court must ask what purpose will the book serve? In this case, a question to be asked is whether the books in question merely help the child in improving the child's handwriting by providing space in a book by copying from a written text or does it pose questions to the child to answer and whether the teacher then can evaluate, on the basis of such answers, the child's ability and understanding? In the present case, the 'work books' or 'practice books' printed and sold by the Petitioner certainly fall in the latter category i.e. they test the child's knowledge, ask questions which the child has to answer, and facilitate evaluating the child's understanding.
"Consequently, this Court is satisfied that in the present case, the books published and sold by the Petitioner are classifiable under HSN 49.01 and not HSN 48.02. In terms of Notification No.2/2017-Central Tax (Trade) dated 28th June, 2017 i.e. Entry No.119 thereunder, such goods classifiable under HSN 49.01 i.e. 'printed books, including Braille books' are wholly exempted from tax.
Read the Order Here