GST on Composite & Mixed Supplies under CGST Act, 2017

The provision of two or more commodities or services might be classified as a ‘composite supply’ or a ‘mixed supply.’ In the GST framework, the idea of composite supply is akin to the concept of organically bundled services in the Service Tax Law. The notion of mixed supply, on the other hand, is wholly new. Every supply should include either products or services, or a combination of goods and services, or a combination of the two. In the event of all such combinations, the law states that such deliveries must be classified as either completely goods or wholly services for tax purposes.

Section 8 of the CGST Act provides guidelines for determining the tax liability on composite and mixed supplies. A composite supply involves two or more goods or services naturally combined and supplied together. The primary supply is considered the principal supply, and the tax liability is determined based on its applicable tax rate.

In contrast, a mixed supply comprises two or more commodities or services sold together. Each component can be provided individually and is not dependent on others. The tax liability for a mixed supply is determined based on the item with the highest tax rate among the constituents.

The time of supply for composite and mixed supplies varies based on whether the primary supply is goods or services. The relevant provisions of the CGST Act apply accordingly.

Section 8. Tax liability on composite and mixed supplies.-

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-

(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and

(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Section-8(a) of CGST Act,2017– Composite Supply

A composite supply is one that consists of two or more goods/services that are naturally combined and supplied together in the regular course of business, one of which is a primary supply. It signifies that the things are usually sold together. The goods are not available individually. If a supply of commodities and/or services meets the following characteristics, it is considered a composite supply:

>The provision of two or more goods or services concurrently;

>It is a natural bundle, i.e., goods or services are often delivered concurrently in the normal course of business.

>They are inseparable.

Applicability of Tax Rates on composite supply

The major supplier’s tax rate will be applicable to the total supply.

A popular example of composite supply is the supply of a laptop with pre-installed software. In this case, the laptop is the principal supply and the software is the secondary supply. As per Section 8(a), the tax liability on this composite supply will be determined based on the tax rate applicable to the laptop (principal supply), regardless of the tax rate on the software.

Section-8(b) of CGST Act,2017- Mixed Supply

Under GST, a mixed supply is a combination of two or more commodities or services sold together for a single price. Each of these components may be given alone and is not reliant on the others.

A Mixed Supply will have the tax rate of the item with the highest rate of tax applied to it under GST.

For example, let’s consider the case of a gift hamper that contains chocolates, a soft toy and a perfume. These items are not naturally bundled or dependent on each other. In this case, the tax liability will be determined by the item with the highest tax rate. Suppose the tax rates are 12% for chocolates, 18% for the soft toy and 28% for the perfume. The tax rate for the entire gift hamper will be considered as 28% (the highest rate), as per Section 8(b).

Time of Supply of Composite and Mixed Supplies under GST:

The following are the Time of Supply for Mixed Supply and Composite Supply respective-

Time of Supply in case of Mixed Supply:

1) Supplies that involves the supply of a service that is subject to higher tax rates than any other constituent supply – Would be regarded a supply of services; and hence provisions pertaining to the supply of services would apply.

2) Supplies that involves supply of products subject to higher tax rates than any other constituent supply – Would be regarded a supply of goods; and hence laws relevant to a supply of goods would apply.

Time of Supply in case of Composite Supply:

1) The primary supply is a supply of services — would be deemed a supply of services; and hence provisions pertaining to the supply of services would apply.

2 )The primary supply is a supply of goods — would be deemed a supply of goods; and hence provisions pertaining to the supply of goods would apply.

Conclusion: Section 8 of the CGST Act, 2017 provides guidelines for determining tax liability on composite and mixed supplies. The tax liability on composite supplies is determined based on the principal supply, while the tax liability on mixed supplies is determined based on the supply with the highest tax rate. Understanding the tax liability on composite and mixed supplies is crucial for businesses operating under the GST framework. By adhering to the provisions outlined in Section 8 of the CGST Act, businesses can correctly classify their supplies and determine the applicable tax rates. This knowledge ensures compliance with GST regulations and avoids any potential tax-related issues.

*****