A new concept of supplying the goods together has been introduced in GST regime which will cover supplies made together irrespective of the fact whether they are related or not. Though the concept of bundled services was there under Service Tax Law which is similar to composite supply but the concept of mixed supply is totally new.

Composite Supply

Section 2(30) of the GST Act defines Composite Supply as a supply 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.

Principal Supply is defined in Section 2(90) of the Act. It means the supply of that goods or service which constitute the predominant element of the composite supply.

So for a Composite Supply two conditions are to be fulfilled:

  • Supply of two or more goods or services together.
  • They are naturally bundled and supplied together in the ordinary course of business.
  • One of them is a Principal Supply.

Tax liability on Composite Supply

Section 8 of the GST Act provided that a composite supply shall be treated as the supply of such Principal supply. So if the Principal supply is Supply of goods than the rate of tax applicable on such goods will be the rate of the composite supply and vice versa.

Now let us understand this with example.

‘A’ goes to a service station for service of his car. Now during the course of service certain parts of the car are changed. Now this will be a composite supply of labour job and parts (goods) where labour job will be the Principal Supply and has predominant element and tax will be paid this composite supply as it is a supply of labour job.

Now lets us take the other way round

‘A’z car engine breaks down and he goes to service station for its replacement and during the course of replacement certain labour job is done. Now this will be composite supply of goods (engine) and labour job but here the predominant element will be change of part or Supply of goods and not that of service and so now Principal supply will be supply of goods and tax on composite supply will be paid on the rate at which that engine (goods) is taxable.

Mixed supply

Section 2(74) of the GST Act defines Mixed Supply which  means two or more individual supplies of goods or services, or any combination, made together with each other by a taxable person for a single price. Each of these items can be supplied separately and is not dependent on any other. So if such supplies are capable of being supplied independently then the same will be mixed supply of such supplies.

Tax liability on Mixed Supply

Section 8 of the GST Act provided that a mixed supply comprising of two or more supplies shall be treated as a supply of that particular supply which attracts the higher rate of tax.

Now let us take few examples

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. All can be sold separately. Now aerated drinks are taxed highest rate of 28% along with Cess, now the entire package will be treated as supply of aerated drinks and will be taxed at higher rate of 28% with cess.

Many stores sell free bucket with purchase of detergent. Now this will be a mixed supply as both can be sold separately. Now if one commodity is taxed at a higher rate the whole package will attract higher rate.

So the business model has to be changed in such a way that commodities attracting same rate are clubbed together.

Author Bio

More Under Goods and Services Tax

Posted Under

Category : Goods and Services Tax (6017)
Type : Articles (15988)
Tags : goods and services tax (4528) GST (4122)

Leave a Reply

Your email address will not be published. Required fields are marked *