Understand Composite and Mixed Supply in GST with insights on Schedule II of CGST Act, 2017. Learn about tax implications, identification criteria, and examples. Navigate Schedule II’s tabular breakdown of transactions treated as supply of goods or services.
Composite supply means a supply which comprise of two or more goods/services, which are naturally bundled and supplied in with each other in the ordinary course of business, one of them is a principal supply. It means that the items are generally sold as in combination.
These items cannot be supplied separately.
where 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.
A supply of goods and/or services will be treated as composite supply if it fulfils below mentioned criteria:
> Supply of two or more goods or services together; and
> Naturally bundled, i.e., goods or services are usually provided together in the normal course of business.
> They cannot be separated from each other.
Tax Rate– The tax rate of the principal supply will apply on the entire supply as composite supply is rather but treated as supply of such principal supply. Accordingly the entire value of [ main supply + ancillary supply] shall be classified under category of main supply/principal supply.
How does one determine if the supply is naturally bundled or not ?
Here are a few ways to identify them:
> Perception of the consumer or the service recipient-If buyers expect services to be provided as a package, then they will be treated naturally.
For example, business conventions look for a combination of hotel accommodation, food & beverages and convention centres.
> Majority of service providers in a particular area provide similar bundle of services– If most of the service providers in the industry offer a package of services, then it can be considered blended naturally.
For example, food provided with an air ticket is common in most airlines.
> Nature of various services in a bundle of services- It also helps in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other service combined with such service are in nature of incidental or ancillary services which help in better enjoyment of the main service
> Other indicators that could point towards determining if the service is bundled or not are:
√ A single price for the package even if customers opt for lesser part
√ The components are advertised as a package or in combination as the different components are not available together
√ Different elements are integral to one overall supply
It can be said that “No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business that is each case has to be examined individually”.
Example- Vinay computers supplies computers worth INR 42,000 along with laptop bag worth INR 1,500 to a customer for INR 43,500. Being naturally bundled, supply of laptop bag alone with the laptop is composite supply which is treated as the supply of the principal supply (i.e. Laptop) Now Assume GST rate on laptop is 18% and on laptop bag is 28%, now 18% will be charged on entire value of INR 43,500.
Mixed Supply under GST means a combination of two or more goods or services made together for a single price and each of these items can be supplied separately and is not dependent on any other.
The individual supplies are independent of each other and are not naturally bundled.
Tax Rate– A mixed supply comprising of two or more supplies shall be treated as supply of that particular supply that attracts highest rate of tax.
How to determine if a particular supply is a mixed supply?
In order to identify if the particular supply is a mixed supply, the first requirement is to rule out that the supply is composite supply. Thus it can be said that transaction consists of supplies not naturally bundled in the ordinary course of business then it would be a mixed supply.
Once composite supply is ruled out and a single consideration is charged for the entire supply of different components, it would be a mixed supply, classified in terms of supply of goods or services attracting highest rate of tax.
Example- Vinay Enterprises supplies 5,000 kits (at INR 25 each) amounting to INR 1,25,000 to General store. Each kit consists of 1 face cream, 1 face tissue packet and 1 nail paint. It is a mixed supply and is treated as supply of that particular supply which attracts highest tax rate. Assuming that the rate of tax applicable on face cream is 18%, on the face tissue packet is 28% and on nail paint is 12%, in the given case, highest tax rate (i.e. face tissue packet) @ 28% will be charged on the entire value of INR 1,25,000.
More than one supply made together and taxed at individual rates
There can be a case where an activity/transaction involves more than one supply of goods or services or both, but neither they are composite supplies nor can be categorised as mixed supplies, that is, all supplies carry independent significance. In such a case, if separate consideration is indicated against each supply, each such supply shall be charged at the respective rate applicable to that particular supply
Example- In case of servicing of cars involving supply of both goods (spare parts) and services (labour) where the value of goods and services are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately.
Schedule II to CGST Act 2017: Activities or Transactions to be treated as Supply of Goods or Supply of Services in tabular format.
| S. No | Transaction | Type/Activities | Nature of supply |
| 1 | Transfer | Any transfer of the title in goods
Any transfer of right in goods or of undivided share in goods without the transfer of title thereof Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed |
Supply of Goods Supply of Services Supply of Goods |
| 2 | Land and Building | Any lease, tenancy, easement, licence to occupy land
Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly |
Supply of Services
Supply of Services |
| 3 | Treatment or process | Any treatment or process which is applied to another person’s goods | Supply of Services |
| 4 | Transfer of business assets | Goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those asset
Where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business he usage or making available of such goods Any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person Exception:
|
Supply of Goods
Supply of Services Supply of Goods |
| 5 | Supply of Services | Renting of immovable property
Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier Temporary transfer or permitting the use or enjoyment of any intellectual property right Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. |
Supply of Services |
| 6 | Composite Supply | Works contract
Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration |
Supply of Services
Supply of Services |
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About the Author : 
The author is Ruchika Bhagat, FCA helping foreign companies in setting up and closing businesses in India and complying with various tax laws applicable to foreign companies while establishing a business in India. Neeraj Bhagat & Co. Chartered Accountants is a well-established Chartered Accountancy firm founded in the year 1997 with its head office in New Delhi.
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