Composite Supply and Mixed Supply both are a kind of packaged/ bundled supply of more than one goods and/ or services. They both are provided in a package for a total price, without any price break up for the individual supply bundled in that package, e.g., Facial service by a beauty parlor.
However, under GST, technically there are some differences between the composite supplies and mixed supplies and hence their tax ability is also different. Therefore, it becomes even more important for the supplier of such packaged supplies to determine if the packaged supply made by him is a composite supply or a mixed supply.
Composite Supply
According to section 2(30) of Central Goods & Services Act (CGST Act), 2017:
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.
Analysis of the above definition:
1. Definition of composite supply includes the word ‘means’ not ‘includes’. Therefore, this definition is an exhaustive definition
2. Supplier should be a taxable person
a. If supplier is not a taxable person, then no question of paying GST arises. However, please note that, as per section 2(107) of CGST Act, every person who is liable for registration under section 22 (on the basis of threshold limit) or section 24 (Compulsory Registration), is a taxable person. Therefore, it is not necessary that only supplier needs to check the provision of composite supply (or mixed supply for that matter), even the recipient may be required to check the provisions of composite supply or mixed supply, if he is required to pay GST under reverse charge basis.
3. Subject matter of packaged supply, i.e., goods and/ or services, should be taxable in nature.
a. All the goods and/ or services provided in the package for which total price is charged should be taxable.
b. For example, if Mr. A (Dentist) provides a supply of Root Canal Treatment (RCT) to a patient Mr. B, then Mr. A is effectively providing two supplies to Mr. B, i.e., RCT service and supply of root filling material, both of which are taxable under GST.
4. All the subject matters of the packaged supply should be of such nature that they are provided in conjunction with each other in the normal course of business, not only on some specific occasions like Diwali
a. If all the goods and/ or services provided in the package are taxable but not so provided in the normal course of business, then it would not treated as a composite supply. In that case, it will become mixed supply. Let’s understand the following example for this:
Example 1: Suppose Mr. A provides a facial service to Mr. B for Rs.1000/- by using some facial products which are taxable in nature. This will be termed as composite supply as all the goods and/or services under the package are taxable and provided as such in the normal course of business.
Example 2: Now suppose, in the above example, Mr. A. along with facial service, provide a Deo free to Mr. B and charges Rs.1200 in total for the facial service. In this case, although, all the goods and/or services in the package are taxable in nature, but Deo is not provided with the facial services in the normal course of business, hence it would not be termed as composite supply, rather it would be termed as Mixed Supply (discussed in the later part of this article).
5. One of the subject matter in the packaged supply should be principal supply and all other supplies should be dependent or subset of that principal supply
If all the above conditions get satisfied, then packaged supply becomes Composite Supply and taxed at the rate applicable to principal supply on the full value of composite supply (section 8)
Mixed Supply
According to section 2(74) of CGST Act, 2017:
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
Analysis of the above definition:
1. Definition of mixed supply includes the word ‘means’ not ‘includes’. Therefore, this definition is an exhaustive definition
2. Supplier should be a taxable person.
a. If supplier is not a taxable person, then no question of paying GST arises. However, please note that, as per section 2(107) of CGST Act, every person who is liable for registration under section 22 (on the basis of threshold limit) or section 24 (Compulsory Registration), is a taxable person. Therefore, it is not necessary that only supplier needs to check the provision of mixed supply (or composite supply for that matter), even the recipient may be required to check the provisions of mixed supply or composite supply, if he is required to pay GST under reverse charge basis.
3. Subject matter of packaged supply, i.e., goods and/or services, should be taxable in nature.
a. All the goods and/ or services provided in the package for which total price is charged should be taxable.
b. For example, if Reliance Fresh provides a 1 kg sugar free with the purchase of 10 kg Potatoes, then Reliance Fresh is effectively providing two supplies to the consumer, i.e., Supply of sugar and supply of potatoes, both of which are taxable under GST.
4. Subject matters of packaged supply should not be of such natures which are so provided in the normal course of business. These combinations under package are occasions driven like stock clearance sale or Diwali etc.
In the above example in point 3 (b), it is not a normal business practice to provide sugar along with potatoes
5. In the normal course, supply of one subject matter should not be dependent on the supply of other subject matter included in the packaged supply.
If all the above conditions get satisfied, then packaged supply becomes Mixed Supply and for the purpose of taxation, it will be assumed that total supply in the package consist of only that subject matter (whether good or service) in the package which attracts relatively highest tax rate (section 8)
Example: If a bakery packet consists of two separate products A and B which are not so provided in the normal course of business, is provided for a total cost of say Rs.500/- on Diwali. It would become a Mixed Supply. Now suppose, product A attracts 12% GST rate and product B attracts 18% GST rate. Now as per section 8, full amount of Rs. 500/- i.e., packet cost or value of mixed supply would be taxed at the rate of 18% only.
Author Bio
Point No.4 of Mixed Supply made the concept more clear. Thnx.
Excellent in depth analysis of composite and mixed supply.
Keep writing up more composite and mixed articles……hahaha (on a lighter side).