| Mar-23-2021

Taxability on Supply of E-Books, Journals & Periodicals to Educational Institutions Under GST

Background:

Recently, I came across an educational institution, a law college, which had procured online books, periodicals and certain other online information services for its college library from different vendors. It was noticed that one vendor had not collected any GST from this college citing that it is an online educational journal whereas second vendor collected GST @ 5% considering the service to be an e-book whereas the third vendor collected GST @ 18%. Considering this instance, I think that taxation in this regard could pose certain issues and controversies. In this article, we deal with these issues.

GST Taxation Scheme regarding supply of online journals, periodicals & e-books:

Services provided by an educational institution to its students, faculty and staff are ‘nil’ rated [Sr. 66(a)/(aa) of CTR Notification No. 12/2017]. Therefore, obviously, such educational institutions are not eligible to claim ITC of GST on their inward supplies. Considering this fact, GST on certain supplies to an educational institution have also been exempt so as to avoid addition in costs to such educational institutions. [Sr. 66(b) of CTR Notification No. 12/2017]

The term, “educational institution” is defined in para 2(y) of CTR Notification No. 12/2017 and hence we shall not be discussing this aspect in detail.

Following services provided to an educational institution are ‘nil’ rated.

• transportation of students, faculty and staff [entry 66(b)(i) of CTR Notification No. 12/2017 from 1st July 2017]
• catering, including any mid-day meals scheme sponsored by the Government. [entry 66(b)(ii) of CTR Notification No. 12/2017 from 1st July 2017]
• security or cleaning or house-keeping services [entry 66(b)(iii) of CTR Notification 12/2017from 1st July 2017]

• services relating to admission to, or conduct of examination [entry 66(b)(iv) of CTR Notification 12/2017 from 1st July 2017]
• supply of online educational journals or periodicals to educational institutions. [entry 66(b)(v) of CTR Notification 12/2017 as amended by CTR Notification No. 2/2018 dated 25th Jan. 2018]

Normally, books, journals & periodicals are purchased by students but educational institutions also are required to purchase books, journals & periodicals for their libraries. On this background, let us understand the issues and probable legal controversies, involved in supply of e-books, online journals & periodicals to educational institutions.

• Supply of books (printed) to an educational institution: Printed books including braille books are ‘nil’ rated, irrespective of the fact as to whom they are supplied. All printed  books,  whether  they  are educational or not are ‘nil’ rated. [Heading 4901. Sr. No. 119 of CTR Notification No. 2/2017]
• Supply of printed newspapers, journals and periodicals: Newspapers, journals and periodicals are also ‘nil’ rated, irrespective of the fact as to whom they are supplied and also irrespective of the fact as to whether they are “educational” or not.[Heading 4902. Sr. No. 120 of CTR Notification   2/2017]. Unlike entry at sr. 119, this entry does not expressly mention the word, “printed” but since these newspapers, journals and periodicals are classified in Chapter 49, obviously  only  printed newspapers, journals & periodicals are covered by this entry. However, one condition is    that such printed newspapers, journals and periodicals, should appear at least four times a week.
• Supply of online educational journals or periodicals to educational institutions: The position as regards supply of online journals and periodicals is summarised as follows:
  1. Supply of online educational journals and periodicals to  educational  institutions  providing pre-school education and education up to  higher  secondary  school  or  equivalent and to educational institutions  providing  approved  vocational  education course are taxable from 1st July 2017 to date. [second proviso of entry 66 of CTR Notification 12/2017, as amended by CTR Notification 2 dated 25th 2018]
  2. Supply of online educational journals or periodicals supplied to educational institutions providing education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force are taxable from 1st July 2017 to 24th 2018, but from 25th Jan. 2018 onwards such services are ‘nil rated [entry 66(b)(v) of CTR Notification No. 12/2017 as amended by CTR Notification No. 2/2018 dated 25th Jan. 2018].

Actually, there does not appear to be any rationale for making such a distinction between these    two classes of educational institutions.

Supply of e-books:

Supply of e-book is taxable at 18% from 1ST July 2018 to 26TH July 2018[entry 22 of CTR 11/2017].
From 27TH July 2018 to date, rate of tax on e-books has been reduced to 5%. [entry 22(i) in CTR Notification No. 12/2017 as amended by CTR Notification No. 13 dated 26th July 2018].

Controversies & Issues, concerning supply of online educational journals, periodicals and e-books:

a. Online educational journals and periodicals:

1. Interpretation of the term, “educational”:
2. The term, “educational institution” is defined in CTR Notification 12/2017 however, the “term,   “education”   or   “educational”   has   not   been   defined   anywhere.   For   instance, periodicals like Supreme Court Cases[SCC] or All India Reporter [AIR], which consists of judgments,  articles  on  legal  subjects  are  used  by  the  professionals  and  are  also  used  by students   of   Law.   These   periodicals,   do   not   profess   themselves   to   be   educational periodicals because their target readership is obviously practitioners and not students.
3. In view of the above, it would have been better if all the online journals or “informational services” supplied to an “educational institution” could have been made ‘nil’ rated. The qualification regarding such journals and periodicals being “educational” could have been provided, when journals and periodicals are supplied to any entity, other than an “educational institution”. This would have also served the intended purpose.Considering the existing taxation structure, different scenarios for the period from 25th Jan.  2018  as  regards  supply  of  online  journals  and  periodicals  can  be  visualised  as follows:
   1. Educational online journals & periodicals supplied to an “educational institution” shall be ‘nil’ [entry 66(b)(v) of CTR Notification 12/2017 as amended]
   2. Non-educational online journals & periodicals supplied to an “educational institution” shall be taxable at 18%. [entry 22(ii) of CTR Notification 11/2017 as amended]. There are some journals and periodicals, which in it’s classical or restrictive sense may not qualify as “educational” but are necessary for the overall development of
   3. Online journals & periodicals (whether educational or not) supplied to any entity, other than an “educational institution” shall be taxable at 18%. [entry 22(ii) of CTR Notification 11/2017 as amended]
4. 1. Interpretation of the term, “journal” and “periodical”:
      The  terms,  “online  journals  and  periodicals”  have  not  been  defined  in  CTR  Notification 12/2017.  However,  as  far  as  the  printed  journal  and  periodical  is  concerned  [Heading 4902 10 20], the condition attached is that it should “appear at least four times a week”.Online journals and periods fall under heading 9984 and no such condition, as regards “appearance at least four times a week” has been attached to such online journals and periodicals. Perhaps, practically, it was also not possible to attach such a condition to an online journal or periodical.In view of the above, it could have been better if all  “information  supply  services”  provided to an “educational institution” could have been made ‘nil’ rated, instead of restricting the benefit only to online journals and periodicals.

b. e-books:
As seen earlier, rate of tax on e-books has been reduced from 18% to 5% from 27TH July 2018 onwards. The condition as regards, “educational” has not been attached to e-books, however one condition applicable is that it should be an electronic version of a printed book [falling under tariff item 4901 in the First Schedule to the Customs Tariff Act, 1975], supplied online which can be read on a computer or a hand-held device.

• Whether “online journals/periodicals” are also “e-books” or vice versa ?:
  Printed books [4901]and printed journals/periodicals [4902] are classified under different sub-headings. Secondly, considering the terminology used in CTR Notification11/2017 and CTR Notification 12/2017, “e-books” and “online journals and periodicals” would be treated distinctly for taxation purposes.
  Online journals, online periodicals and e-books are covered under the heading 9984. Online educational journals and periodicals supplied to an “educational institution” are ‘nil’ rated [entry 66 of CTR Notification 12/2017 as amended]. However, e-books even if supplied to an educational institution will attract tax @ 5% because entry 66 does not mention the term, “e-books” expressly. It is felt that this would have never been the intention of the law makers. There is absolutely no logical reason for making any such distinction between online journals/periodicals and e-books when both are being supplied to an educational institution.
• Only electronic version:
  Considering the current trend, it is quite possible that some educational books could be published only in electronic form. Such an e-book, even if it is “educational” and even if supplied to an educational institution would not be eligible for the lower rate of 5%.

Conclusion:

There was already a gradual shift from printed versions to electronic versions of educational materials and now due to the COVID-19 situation, this shift has accelerated. Considering the fact that educational services being exempt, any GST collected on its inward supplies is a cost to the educational institutions and ultimately to students. Therefore, it is felt that the taxation scheme as regards supplies to an educational institution needs to be simplified and rationalised.