GST: Composite supply & mixed supply- section 8, with examples

Section 8 of CGST ACT, 2017:

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.

A. Composite supply:

If it involves more than one goods and/ or services which are naturally bundled together: These are referred to as composite supply of goods and / or services. It shall be deemed to be a supply of those goods or services, which constitutes the principal supply therein.

Example No. 1: 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 the principal supply. This implies that the supply will be taxed wholly as supply of goods.

Example No. 2: If a contract is entered for (i) supply of certain goods and erection and installation of the same thereto or (ii) supply of certain goods along with installation and warranty thereto, it is important to note that these are naturally bundled and therefore would qualify as ‘composite supply’. Accordingly, it would qualify as supply of the goods therein, which is essentially the principal supply in the contract. Thus, the value attributable to erection and installation or installation and warranty thereto will also be taxable as if they are supply of the goods therein.

Example No. 3: A laptop seller sold laptop to customers along with laptop bag, now 1^st test is satisfied that there are two products and sold together but 2^nd test is failed because bag and laptop are not naturally bundled means bag and laptop can be sold separately also. Therefore it is NOT composite supply, will be treated as mixed supply.

B. Mixed Supply

If it involves supply of more than one goods and / or services which are not naturally bundled together: These are referred to as mixed supply of goods and / or services. It shall be deemed to be a supply of that goods or services therein, which are liable to tax at the highest rate of GST.

A supply of more than one goods and / or services as a bundle will be reckoned as ‘mixed supply’ if:

(i) such goods and / or services are supplied together for a single price

(ii) they are not naturally bundled together and (iii) it does not qualify as composite s

Example No. 4: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately. This implies that the supply will be taxed wholly as supply of those goods which are liable to the highest rate of GST.

Example No. 5: If a tooth paste (say for instance it is liable to GST at 12%) is bundled along with a tooth brush (say for instance it is liable to GST at 18%) and is sold as a single unit for a single price, it would be reckoned as a mixed supply. This would therefore be liable to GST at 18% (higher of 12% or 18% applicable to each of the goods therein).

However, every supply should be independently viewed .

Watch highlights of 22^nd GST council meeting held on 6^th Oct, 2017

https://youtu.be/_R_cz7v0gA8