Court Buzz, GST

Karnataka AAR classifies Security Excise Labels to HSN Code 4911, CGST@6% & SGST@6%.

Case: Marketing, Communication & Advertising Limited.

Forum: Karnataka AAR


The Applicant, is a State Public Sector Enterprise owned by the Government of Karnataka. The Applicant is into the activity of printing of security excise labels for supply to various distilleries as per the directions of the Government of Karnataka. The rate for printing and supply of security excise labels is approved by the Department of Excise, Government of Karnataka every year. The activity of printing of labels is carried out by Manipal Technologies Ltd., under the strict control and supervision of the Applicant & also the Department of Excise, Government of Karnataka. A copy of invoice by M/s Manipal Technologies Limited towards printing and supply of labels, revealed that they had charged GST @ 12% (CGST 6% and SGST 6%) . Further the Applicant shared a copy of an invoice issued by M/s Khoday RCA Industries, Bangalore, which revealed that they had charged the Applicant GST @ 18% (CGST 9% and SGST 9%), on classifying the activity under HSN Code 4821.

The Applicant thus sought an advanced ruling on the issue of correct classification of Security Excise Adhesive Labels i.e., HSN Code applicable and the rate of tax applicable on supply of Security Excise Adhesive Labels.

Key points

The Applicant was classifying the product under HSN Code 4821 attracting CGST @ 9% and SGST @ 9%. However, they were of the opinion that the product is rightly classifiable under HSN Code 4911 attracting CGST @ 6% and SGST @ 6%. The Applicant thus relied upon Supreme Court judgment in the case of M/s. Holostick India Ltd. the Hon’ble Supreme Court in the case of M/s. Holostick India Ltd dealt with an identical issue. In that case, the question was whether a coated metallised film (classified under Central Excise Tariff 39.20.36) undergoing embossing and applied with an adhesive coating resulting in a hologram would be classified under Heading 4901 or 3919. The judgment was given keeping Note No.2 to entry 49. The Hon’ble SC held that the Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to “reduce disputes on account of tariff classification”. Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central Excise Tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act.

Accordingly, the Karnataka AAR elaborated that the HSN Explanatory Notes to ‘other printed atter’, Item No. 10 which states that ‘self-adhesive printed stickers designed to be used, for ample, for publicity, advertising or mere decoration, e.g. “comic stickers” and “window stickers” would be included.” The Security Excise labels is for security. We also observe that akin to Note No.2 to entry 49 in Central Excise Tariff, a similar Note No. 12 is existing in Chapter 48 of GST Tariff.

The sixth edition of Vol. III of Explanatory Notes of World Customs Organisation in relation to Chapter Heading 4911 also includes at item No. 10, “Self-adhesive printed stickers designed to be used, for example, for publicity, advertising or mere decoration, e.g., “comic stickers” and “window stickers”. It was thus concluded that the judgment of the Hon’ble SC in the case of M/s. Holostick India Ltd wholly applies to the instant case and therefore the product in question is classified under the Heading 4911 and rate of tax is 12% as per Sr. No. 132 of schedule II of Notification No. 01/2017-CT (R) dated 28.06.2017. The HSN Code of Security Excise Labels is 4911 and the rate of tax applicable is 6% under the CGST Act and 6% under the SGST Act and 12% under the IGST Act.

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