When someone want to find tax liability for composite and mixed supply or for composition levy, he must understand the three terms before arriving at decision to tax the transaction. These three terms are distinct with each other and having distinct impact on tax liability of a taxpayer. Therefore we should understand the meaning of these kind of transactions before taxing a transaction as composite or mixed supply or that of composition levy.

Composite Supply under GST

Composite supply is defined under CGST Act as “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.

A composite supply has to fulfill the following conditions to be called as composite supply.

1. Supply to be made by a Taxable Person : The term “taxable person” is defined as a person who is registered or liable to be registered under section 22 or section 24. Meaning thereby composite supply can be effected by a person who is registered or liable to be registered under GST laws. An unregistered person cannot effect a composite supply.

2. Two or more taxable supplies: There should be two or more taxable supplies of goods or services or combination of goods and services. The supplies of goods or services should also be taxable supplies. Combination of one taxable supply and one exempted supply would not suffice the condition of a composite supply.

3. Supplies should be naturally bundled : The term “naturally bundled” is not defined in the CGST Act. However two supplies shall be considered naturally bundled if one is a principal supply and other supply which is ancillary make the principal supply more effective, more convenient, more comfortable, more useful and more enjoyable. E.g. food by railway on board to passengers make the journey of passengers more comfortable and enjoyable.

4. In conjunction with each other : The supplies should be provided simultaneously at the same time or at the time of principal supply being continue or just after the main supply. E.g. Packing material and disposables with door step food delivery. Another is installation of TV Set just after delivery of same at the premises of consumer.

5. In ordinary course of business : The goods or services or both provided as a package or bundle should be provided in ordinary course of business. Meaning thereby it should be the practice of majority of traders/service providers to provide different elements of supplies as a package or bundle. Most of the consumers/receivers of supply expect to receive those packages/bundles in conjunction. Composite supply should be advertised as a whole and there should be a single price of the whole package. There should a principle supply and other supply should be ancillary to main supply and if any one of the supply is removed the other supplies lost their usefulness. There is no clear cut formula whether the composite supply is provided in ordinary course of business. One has to see each and every case of composite supply whether it is in the ordinary course of business or not on the basis of some of the indicators cited above including other industry specific requirements.

E.g. Breakfast provided by hotels with the service of lodging and boarding is naturally bundled as it is frequent practice adopted by hotel industry and most of the consumer expect hotel to provide breakfast during the time of checkin.

6. Principle Supply : A principle supply is defined in CGST Act as “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. Meaning Principal supply is that supply for which supplier and receipient come together and that supply which is the actual intention of consumer to get from the supplier. E.g. Mr. ‘A’ go to auto-mobile shop for purchasing an auto part. However supplier also installed it at the same time and charge a single price for that auto part including installation. In this case the actual intention of the consumer is to buy the auto part. The installation is ancillary to principal supply which is purchase of auto part. Therefore predominant nature of supply is purchase of goods.

A composite supply has to comply with the above conditions to get a composite supply character. In short composite supply is the bundle of two or more taxable supplies which are provided by the traders or service providers to their consumers as a normal trade practice normally for a single price and consumers also become habitual of getting those multiple supplies together.

7. Rate of Tax on Composite Supply :  The rate of tax on composite supply is applicable at the rate which is applicable to principal supply of the composite supply. Eg. Meal is sold by supplier with disposables. In this case meal is the principal supply and disposables are ancillary to meal. Rate of tax shall be that which is applicable to meal.

Mixed Supply under GST

The mixed supply is defined in the Act as “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

A mixed supply has to comply with the following condition to be called as mixed supply.

1. Two or more individual supplies : There should be two or more individual supplies whether these are taxable supplies or exempted supplies or any combination thereof. Unlike in case of composite supply there is no need that all the supplies of bundle should be a taxable supply. The supplies could be that of goods or services or both or any combination of these two.

2. Provided in conjunction of each other : Like in case of composite supply, mixed supply should also be provided at the same time or as a bundle or package of multiple supplies.

3. Single price :  There should be a single price for multiple supplies forming a combination.

4. Does not constitute a composite supply : A supply could only become a mixed supply when it fail to get the character of a composite supply. All the necessary conditions of a composite supply are not present in the combination. Meaning thereby the combination offered for a single price should not be naturally bundled and should not be provided in ordinary course of business. The combination has to fail these two tests for calling a mixed supply.

In short the mixed supply is a combination of multiple supplies which are independent from each other. The combination is not sold by the trade in normal trade practice. The constituent supply of combination can be sold independently. The consumer do not generally expect the combination to be provided in conjunction with each other. E.g.  Toilet cleaner sold with toilet brush for a single price.  Another one is Diwali gift packs containing sweets, chocolates, namkeen and juices etc.

5. Rate of Tax applicable to Mixed Supply : The rate of tax applicable to mixed supply is the highest rate applicable to any of the constituent supply of the combination.

Example-1: Fruits and chocolates are sold as combination for single price. Fruits are taxable at Nil rate while chocolates are taxable at 18%. Whole of the combo shall be taxable at 18% despite fruits are Nil rated.

Example-2: 5 kg pack of Branded Rice and 5 kg pack of washing powder are sold as a combo for a single price. Branded rice is taxable at 5% while washing powder is taxable at 18%. Whole the combo is taxable at 18% which is the highest rate.

Composition Levy under GST

Composition levy is kind of GST for small taxpayers who are not able to do complicated compliances of GST laws as applicable to regular taxpayers. The compliance level for those small taxpayers is very minimal and applicable tax rate for composition levy is uniform across all type of goods or services. Infact composition levy is a scheme provided by Govt. to small taxpayers at their option. Therefore it is at the option of the small taxpayer whether he wants to avail the scheme or not. Moreover such taxpayer can avail the scheme for a particular financial year and also can opt out from the scheme at the beginning of upcoming financial year. Before opting in for composition levy by any small taxpayer, he must know the following.

Eligibility of composition levy :

Type of taxpayer Aggregate Turnover limit Rate of tax applicable Applicable section
Manufacturer other than manufacturers of

i)  Ice cream and other edible ice, whether or not containing cocoa

ii) Pan Masala

iii) Tobacco and manufactured tobacco substitutes

1.5 corre (w.e.f. 01-04-2019)

In case of special category states it is 75 Lacs i.e.

(i)Arunachal Pradesh, (ii) Manipur,

(iii) Meghalaya,

(iv) Mizoram, (v) Nagaland, (vi) Sikkim, (vii) Tripura, (viii) Uttarakhand:

   0.5 % CGST


On the turnover in the State/Union territory

Section 10(1)(a)
Restaurants serving Food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption) 1.5 crore (w.e.f. 01-04-2019)

In case of special category states it is 75 Lacs

2.5 % CGST

2.5 % SGST

On the turnover in the State/ Union territory

Section 10(1)(b)
Traders 1.5 crore (w.e.f. 01-04-2019)

In case of special category states it is 75 Lacs

0.5 % CGST


On the turnover in the State/ Union territory

Section 10(1)(c)
Service Providers or mix suppliers providing both goods and services 50 Lacs 3% CGST


On Turnover in the State/Union territory

Section 10(2A)

The manufacturers, restaurants and traders can also provide services upto the limit of 10% of turnover or Rs. 5 lacs whichever is higher.

Example :

1. Mr. A is a manufacturer of shoes and his turnover from supply of shoes in preceding financial year is Rs. 1.25 crore. Mr. A also provide services of shoe designs to other shoe manufacturers and his turnover such services is Rs. 9 Lac. Therefore total turnover from supply of shoes and supply of service is Rs. 1.34 crore. Mr. A can opt for composition scheme in section 10(1)(a) and shall pay tax @ .5% CGST and .5% SGST on all his turnover of goods and services as his turnover of supply of services is less than 10% of aggregate turnover.

2. Mr. B is trader of garments and his turnover is 25 lac rupees in preceding financial year. He also provide services of commission agent and his receiving of commission are Rs. 4.8 lac rupees in preceding financial year. Mr. B can opt composition levy u/s 10(1(c) @ 0.5% CGST and 0.5% SGST as his supply of services are within 5 lac rupees.

  • Other Conditions to be fulfilled :

1. He is not engaged in the supply of services other than supplies of restaurant services as mentioned above. Although he can provide services upto 10% of turnover or 5 Lac whichever is higher.

2. He is not engaged in making any supply of goods or services which are not leviable to tax under this Act. E.g. Alcoholic liquor for human consumption, petrol, high speed diesel, natural gas and aviation turbine fuel.

3. He is not engaged in making any inter-State outward supplies of goods or services. A composition taxpayer can supply within the state only. However he can purchase outside his State.

4. He is not engaged in making any supply of goods or services through an electronic commerce operator who collects TCS like Flipkart, Amazon etc.

5. He is not a manufacturer of such goods as may be notified by the Government. Notified goods are Ice cream and other edible ice, whether or not containing cocoa, Pan Masala, Tobacco and manufactured tobacco substitutes.

6. He is neither a casual taxable person nor a non-resident taxable person

7. Where more than one registered person are having the same Permanent Account Number issued under the Income-tax Act, 1961, the registered person shall not be eligible to opt for the scheme unless all such registered persons opt to pay tax under composition levy.

8. The option availed composition scheme shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the specified limit of 1.5 crore or 50 lacs as applicable.

9. Composition taxpayer shall not be entitle to credit of Input Tax paid on his purchases or inward supplies.

10. Composition taxpayer shall not collect tax from recipients.

11. He shall pay tax under reverse charge mechanism where applicable.

12. He shall mention the words ― “composition taxable person, not eligible to collect tax on supplies” at the top of the “bill of supply” issued by him

13. He shall mention the words ― “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business

  • Summary :
Nature of supply Rate of Tax Remarks
Composite Supply The rate which is applicable to principal supply It is a concept applicable to a regular taxable person where he do something extra while providing his principal supply. Any charge for that extra activity shall be taxable at the rate of principal supply.
Mixed Supply The highest rate which is applicable to any of the goods/service forming part of the bundle shall be applicable to whole of the bundle. It is a bundle of individual goods or services which is charged for single price. This concept is also applicable to all regular suppliers.
Composition Levy 0.5% CGST & 0.5% SGST/UTGST in case of Traders/manufacturers

2.5% CGST & 2.5% SGST/UTGST in case of restaurants

3% CGST & 3% SGST/UTGST in case of Service providers

It is not for regular suppliers. It is for those taxable persons who opt for composition levy for sake of less compliances.

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October 2021