Mixed Supply Under GST: Highest Tax Rate Rule, Examples & DOMS Industries Ruling

By Candice Moyo Goods and Services Tax Articles October 4, 2026

Summary: Mixed supply under GST arises when two or more individual supplies of goods or services are supplied together by a taxable person for a single price but do not constitute a composite supply under Section 2(30) of the CGST Act. Under Section 2(74), such independently identifiable supplies constitute a mixed supply, and Section 8(b) requires the entire transaction to be treated as the supply attracting the highest GST rate. This differs from a composite supply, where naturally bundled supplies are taxed according to the principal supply. The distinction is particularly important for gift hampers, promotional combinations, retail kits and e-commerce bundles because even a relatively small higher-taxed component may affect the GST rate applicable to the complete package. The DOMS Industries ruling provides a practical illustration: pencils supplied with an eraser and sharpener were treated as a mixed supply because the items were separately identifiable and were not considered naturally bundled, an approach subsequently upheld by the Gujarat AAAR. Businesses should therefore identify every component of a package, determine whether the supplies are naturally bundled, establish whether a principal supply exists, check the HSN classification and GST rate of each component, and maintain documentation supporting the adopted classification.

MIXED SUPPLY UNDER GST: ONE PRICE, MULTIPLE GOODS AND THE TAX CONSEQUENCES

Introduction
Legal Framework
Meaning of Mixed Supply
Use of composite supply versus mixed supply.
Section 8 and Tax Liability
Contemporary and Practical Analysis
Mixed Supplies in the Retail and E-Commerce Sector
DOMS Industries: A Practical Example
Critical Discussion
The Importance of “Natural Bundling”
Highest-Rate Rule and Its Commercial Impact
Judicial Approach to Bundled Supplies
Practical Difficulties and Implications
Conclusion and Suggestions
References
Statutes and Government Materials
Judicial and Advance Ruling Authorities

Introduction

Goods and Service Tax (GST) has been implemented in India to consolidate many indirect taxes into a single tax regime. An important aspect of the GST system is the idea of undertaking transactions with multiple goods or services. Today, suppliers often offer products in packages, kits, promotional combinations and gift hampers for one combined price. A legal issue that is important to consider in these transactions is whether the overall package should be taxed at the rate of its main component or whether the highest rate of the individual components will apply to the transaction.

The Central Goods and Services Tax Act, 2017 (CGST Act) has dealt with this issue in terms of composite supply and mixed supply. Section 2(74) specifies that two or more individual supplies of goods and/or services are a mixed supply if: the supplies are supplied together by a taxable person for a single consideration; and the supplies are not supplies of a composite supply. Section 8(b) also states that a ‘mixed supply’ is deemed to be a supply of the highest rate taxed item.

The difference may have a commercial impact as it can impact the calculation of the GST rate for the package as a whole if one of the included items is separately taxable. This article analyzes the legal rules governing mixed supplies, sets them apart from composite supplies and looks at the implications for supply chain businesses and consumers, and concludes with a discussion about the recent DOMS Industries case, which serves as another example of the ongoing significance of the issue.

Legal Framework

Meaning of Mixed Supply

“Mixed supply” is defined under Section 2(74) of the CGST Act as two or more individual supplies of goods or services or both made in conjunction with each other by a taxable person for one price which does not constitute composite supply. The statutory illustration provides examples of a pack of canned foods and sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices being sold for a single price. Each item is a separate product and doesn’t rely on another product to be sold, so the package is considered a mixed supply if the items are sold together for one price.

Thus, three significant aspects can be highlighted:

Must have 2 or more person supplies.

They need to be provided in combination and at one price.

The transaction shall not be deemed to be a composite supply.

The third requirement is particularly important. A single transaction shouldn’t automatically be deemed a mixed supply, simply because multiple goods and services are being sold together. The first question is if the transaction is a composite supply.

Use of composite supply versus mixed supply.

Under Section 2(30) a composite supply is one that is made up of two or more supplies, one of which is the principal supply and is naturally packaged with the other supplies as part of the same transaction, and the business is carried on in the usual manner. Section 2(90) says that the “principal supply” is the most important supply in the composite supply to which the other supplies are ancillary.

The difference can therefore be summarised as follows:

Basis	Composite Supply	Mixed Supply
Nature of combination	Naturally bundled	Not naturally bundled
Principal supply	Present	No principal supply in the statutory sense
Single price	May be involved	Required
Tax treatment	Rate of principal supply	Rate of highest-taxed component
Example	Goods packed, transported and insured together	Gift hamper containing unrelated products

The GST Council has also explained that composite supplies are treated as supplies of the principal supply, whereas mixed supplies are treated according to the supply attracting the highest rate of tax.

Section 8 and Tax Liability

Section 8 of the CGST Act establishes the tax treatment of both categories. Under Section 8(a), a composite supply is treated as a supply of its principal supply. In contrast, Section 8(b) provides that a mixed supply is treated as a supply of the particular item which attracts the highest rate of tax.

The purpose of this provision is to prevent businesses from combining separately taxable goods under a single lower-tax package merely by assigning a dominant description to the package. At the same time, the provision creates an important compliance responsibility because businesses must correctly identify every taxable component of a package before determining the applicable rate.

Contemporary and Practical Analysis

Mixed Supplies in the Retail and E-Commerce Sector

The development of organised retail, e-commerce and promotional marketing makes mixed supplies more relevant. It is a usual practice of businesses to package their products into festival kits, school kits, beauty kits, corporate gift kits and promotional combinations.

For instance, a retailer provides several separate and separately saleable food and non-food items in a single basket at a single price for the festival. The transaction may fall within the definition of mixed supply if the products are “naturally” brought together in the “ordinary course of business” for promotional or marketing purposes, but do not form part of a single supply chain.

The point is of practical importance. The supplier may not necessarily be able to use the rate of the product which is the most important or valuable product. After the transaction has become legally a mixed supply in accordance with Section 68(2) of the CGT regulations, Section 8(b) of the regulations provides that the tax treatment is to be the same as if the component were a single supply taxed at the highest rate.

This may impact the price considerations. One business might think that the added value of an accessory on the product is too low to count commercially. But, if the accessory generates a higher rate, and the transaction is a mixed supply, it could impact the rate for the package.

DOMS Industries: A Practical Example

A useful contemporary example is the ruling concerning DOMS Industries Pvt. Ltd. The dispute concerned products including the “DOMS A1 Pencil”, consisting of ten pencils, an eraser and a sharpener. The Gujarat Authority for Advance Ruling had treated the product as a mixed supply. The matter subsequently reached the Gujarat Appellate Authority for Advance Ruling (AAAR), which dealt with the issue in 2025.

The applicant argued, in substance, that the products were supplied together as a kit and that the pencil could be considered the principal product. The authorities examined whether the individual items were naturally bundled and whether there was a principal supply.

The Gujarat AAR found that the pencils, eraser and sharpener were separately identifiable products and that the additional products functioned as accessories rather than being integral to the pencil. It therefore concluded that the conditions for composite supply were not satisfied and that the package constituted a mixed supply.

The Gujarat AAAR subsequently upheld this approach in January 2025. It concluded that the DOMS A1 product was not naturally bundled, did not have a principal supply for purposes of the composite-supply definition and was therefore a mixed supply. The authority also held that the HSN and rate applicable to the component attracting the highest rate had to be considered under Section 8(b).

This example demonstrates that the commercial description of a product as a “kit” or “pack” is not by itself decisive. The legal character of the individual components and the statutory requirements of Sections 2(30), 2(74), 2(90) and 8 must be examined.

Critical Discussion

The Importance of “Natural Bundling”

The most difficult issue in distinguishing composite supply from mixed supply is often the concept of natural bundling.

The CGST Act does not provide a complete mathematical test for determining when supplies are naturally bundled. Consequently, the circumstances of each transaction have to be considered. Relevant factors may include the normal business practice of the industry, the relationship between the components, consumer expectations, whether the components are ordinarily supplied together, and whether one component is ancillary to another.

The GST Council’s explanatory material states that a mixed supply is identified after ruling out composite supply. Where the constituent supplies are not naturally bundled in the ordinary course of business, the transaction may fall within the mixed-supply provisions if the other statutory conditions are satisfied.

This creates a practical difficulty. Businesses may have different views about whether a particular bundle represents a normal commercial combination or simply a promotional package.

For example, a product together with its ordinary packaging and transportation may have a very different legal character from a gift box containing unrelated products. The former may demonstrate characteristics of a composite supply, while the latter may potentially satisfy the requirements of mixed supply.

Highest-Rate Rule and Its Commercial Impact

The highest-rate rule under Section 8(b) is significant because the tax consequence can depend upon the inclusion of a single product within a package.

Consider a hypothetical package consisting of three independently taxable products. Assume, purely for illustration, that Product A attracts 5% GST, Product B attracts 12%, and Product C attracts 18%. If the package is legally classified as a mixed supply and sold for a single price, Section 8(b) requires the transaction to be treated according to the component attracting the highest rate, namely Product C.

This demonstrates why businesses need to examine the tax classification of each component before designing promotional packages.

The issue becomes even more important when a product is described as being supplied “free” with another product. Calling an item “free” does not automatically remove it from GST analysis. The actual structure of the transaction, consideration, pricing and nature of the supplies must be examined under the CGST Act.

Judicial Approach to Bundled Supplies

Indian courts have also recognised the importance of correctly distinguishing composite and mixed supplies.

In Union of India v. Mohit Minerals Pvt. Ltd., the Supreme Court examined the concept of composite supply in the context of CIF contracts. The Court discussed Section 2(30) and Section 8 and recognised that where goods, transportation and insurance are naturally bundled, the statutory treatment of composite supply becomes relevant. The decision demonstrates the importance of looking at the transaction as a legally structured bundle rather than mechanically taxing every component separately.

Similarly, the Gujarat High Court in Torrent Power Ltd. v. Union of India considered arguments concerning composite and mixed supply and referred to the statutory distinction under Section 2(74) and Section 8(b). The Court noted that the mixed-supply illustration in the CGST Act indicates a combination where individual items are capable of being supplied independently and are not dependent upon one another.

A more recent decision, M/s Stark Photo Book v. Assistant Commissioner, decided by the Kerala High Court on 7 October 2025, also illustrates the importance of classification where a transaction involves both goods and services. The Court held, on the facts before it, that printing photographs using customer-supplied digital content and printer-supplied materials constituted a composite supply, with the printing service being the predominant element. Although this was a composite-supply dispute rather than a pure mixed-supply case, it demonstrates why the statutory distinction between principal supply, ancillary supply and independent supplies remains important in GST classification.

Practical Difficulties and Implications

The mixed-supply provisions offer a clear statutory rule; however, there may be practical challenges.

One, it can require factual and commercial judgments to identify if products are natural bundled products. Applying such measures to apparently identical transactions may be done in different ways by different businesses.

Second, rapid change in the rate of GST can lead to greater significance for classification. The rate of a specific component may keep varying from time to time with the notification provided based on the recommendations of the GST council. Therefore, businesses have to make sure that their billing systems and accounting systems are in line with the rate that is to be applied for the current period.

Thirdly, another hurdle arises for ecommerce companies, as online platforms tend to generate automatically created “combo offers”. A supplier might have to decide if the individual supplies are separate supplies or if the platform is indeed offering a single “bundled” package for one price.

Fourth, a business must keep the correct records. Product descriptions, invoices, pricing and HSN classification/agreements should be in accordance with legal nature of the transaction. Where the documentation is not of a high quality, a taxpayer may have difficulty proving that a specific package is a composite supply, not a mixed supply.

Lastly, the DOMS Industries case illustrates that a relatively small accessory can have tax implications if it is packaged. Where Section 8(b) is applied, the value of an item in commerce may not be the most important consideration, because its value as an article of manufacture and the tax consequences to which it falls may be important.

Conclusion and Suggestions

Mixed supply is an important concept under India’s GST framework because modern businesses frequently sell several products together for a single price. Sections 2(74) and 8(b) of the CGST Act provide the statutory foundation for determining the tax treatment of such transactions.

The fundamental distinction is between a composite supply, in which different taxable supplies are naturally bundled and one constitutes the principal supply, and a mixed supply, in which independent supplies are combined for a single price without satisfying the requirements of composite supply.

The tax consequence of this distinction is substantial. A composite supply is taxed according to its principal supply, whereas a mixed supply is treated according to the supply attracting the highest rate of tax. Therefore, businesses should not assume that the principal or most commercially important product will determine the GST rate of every package.

The DOMS Industries ruling provides a useful practical illustration. The Gujarat authorities treated the combination of pencils, eraser and sharpener as a mixed supply because the individual products were not considered naturally bundled and no principal supply was established for purposes of the statutory test. The subsequent appellate ruling in 2025 reinforced the application of Section 8(b).

For businesses, the following measures can reduce disputes:

1. Identify every individual supply contained in a package.

2. Determine whether the components are naturally bundled in the ordinary course of business.

3. Establish whether a principal supply exists before treating the transaction as composite.

4. Check the applicable GST rate and HSN classification of each component.

5. Maintain proper invoices, product descriptions and supporting documentation.

6. Review promotional packages whenever GST rates change.

7. Seek professional advice or an advance ruling where the classification is genuinely uncertain.

Ultimately, the mixed-supply provisions seek to ensure that the tax treatment follows the legal nature of the transaction rather than merely its marketing description. Correct classification is therefore essential not only for determining the amount of GST payable but also for maintaining accurate invoicing, accounting and compliance under the GST regime.