INTRODUCTION

With the introduction of GST as a means of Indirect Taxation, collection by means of multiple taxation was done away and a new uniform system was put into place. However, many a times when two or more goods are sold in a combination, a situation arises wherein it gets difficult to understand what tax rate needs to be applied. In order to overcome this, the CGST Act, 2017 has introduced ‘composite supply’ and ‘mixed supply’.

COMPOSITE SUPPLY

Composite Supply applies for more than 1 service/goods. As per Section 2(30) of the GST Act, 2017, a supply in which a person who is subject to taxation makes a supply of two or more goods/services or both which are subject to taxation, and these goods/services or both, are naturally bundled or rather say are supplied in combination with one another, where one them is a principle supply, then in the ordinary course of business this supply comes under ‘Composite Supply’.

The main ingredients for ‘Composite Supply’ are:

1. Supply is made

2. By a Taxable Person

3. Supply of two or more goods/services or both

4. Which are Naturally bundled

5. One of them is the primary supply

6. Supplied in the ordinary course of business

IILUSTRATION:

Supply is made for goods which are packed and transported with insurance. Now this supply is made by a person who is subject to taxation. And this combination of goods and services are naturally bonded, i.e., they cannot be separated from one another. Here supply of goods is the primary supply, i.e, the predominant element as per Section 2(90) of the said Act and the combination of the supply of goods, packing and transportation with insurance, is the composite supply.

MIXED SUPPLY

As per Section 2(74) of the CGST Act, 2017, a supply in which a person who is subject to taxation makes an individual supply of two or more goods/services or both which are subject to taxation, and these goods/services or both, are supplied in combination with one another for a single, where this supply does not come under ‘Composite Supply’, then such a supply is a mixed supply. In such supply the good which are supplied in one single package can be sold separately and is independent of one another.

ILLUSTRATION:

Supply is made for a package which consists of Sweets, Aerated Drinks, Canned Foods, Chocolates, Dry Fruits, Cakes, Candies, Fruit Juices, Chips and Mouth Fresheners. Now this package when supplied is supplied for a single price. This is what exactly is a mixed supply. However, in the present scenario if the goods were not supplied in one single package but was rather supplied separately then, it would not have been called mixed supply.

TAX LIABILITY ON COMPOSITE/MIXED SUPPLY

As per Section 8 of the CGST Act 2017, the tax liability on Composite/Mixed Supply is calculated in the following ways:

1. For composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply.

2. For mixed supply, the tax rate on the supply which has the highest rate of tax, will be treated as the tax rate on the given mixed supply.

ILLUSTRATION:

  • Composite Supply

Let us take an example where a taxable person is staying in a 5-star resort. Now this person avails residence, food, security, sports, spa and laundry. All these services are naturally bundled and cannot be separated from one another. Here residence is the primary supply and all the services together (residence, food, security, sports, spa and laundry) is the composite supply.

Let assume the tax rate is:

Residence = 28%

Food = 18%

Security = 12%

Sports = 18%

Spa = 40%

Laundry = 5%

Here the rate of composite supply will be the rate of principal supply. Hence GST levied is 28%.

  • Mixed Supply

Let us take the following examples:

1. A single package is supplied consisting of the following good in the form of Cadbury Celebration (Dairy Milk Silk, Dairy Milk Dry Fruit, Sweets and Bourn Vita). Here since all the goods are supplied in a single package for a single price, it is mixed supply.

Let us assume the tax rates as:

Dairy Milk Silk: 5%

Dairy Milk Dry Fruit: 40%

Sweets: 12%

Bourn Vita: 18%

The cost of the package of Cadbury Celebration is suppose Rs. 1000/-

Now in order to calculate the GST levied we will consider the highest tax rate among the following items, i.e., rate of 40%.

Hence in this case, the total price of the Package will be: Rs. 1000 * 40%

2. A single package is supplied consisting of the following good in the form of Tooth Paste Offer (Tooth Brush and Tooth Paste). Here since all the goods are supplied in a single package for a single price, it is mixed supply.

Let us assume the tax rates as:

Tooth Paste: 18%

Tooth Brush: 5%

The cost of the package of Cadbury Celebration is suppose Rs. 82/-

Now in order to calculate the GST levied we will consider the highest tax rate among the following items, i.e., rate of 18%.

Hence in this case, the total price of the Package will be: Rs. 82*18%

CONCLUSION

One of the main differences between Composite and Mixed Supply is that in Composite Supply, the goods/services or both are naturally bundled and cannot be supplied separately. However, in mixed supply, the goods/services or both are not naturally bundled and can be supplied separately. In case of composite supply, the rate of tax on principle supply is taken as the rate of tax, irrespective of the fact whether it is the highest or the lowest. But in mixed supply, the highest rate of tax is taken as the rate of tax, irrespective of the whether is good/service is the principle supply or not.

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