Mixed Supply’ and ‘Composite Supply’ are defined in the GST Law. The purpose/intent for such specific definition was to differentiate between the two types of supplies so as to determine the appropriate tax rate that would be applicable for such supplies.

If a supply is determined as a “composite supply”, then the applicable tax rate for the entire supply would be the rate applicable for the “principal supply”, however, if a supply is determined as a “mixed supply”, then the applicable tax rate for the entire supply would be the rate of goods and/or services that attracts the highest tax rate.

Relevant Provisions of the Law:

Section 8 of the CGST Act, 2017 describes the tax liabilities in case of specific types of supplies as:

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 2(74) of the CGST Act, 2017 defines “Mixed Supply” as:

(74) ―”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. 

Illustration.— A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks 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;

Section 2(30) of the CGST Act, 2017 defines “composite supply” as:

(30) ―”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;

Illustration.— 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 a principal supply;

Section 2(52) of the CGST Act, 2017 defines “goods” as:

(52) “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; 

Section 2(102) of the CGST Act, 2017 defines “services” as:

(102) ―”services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; 

[Explanation.–– For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities;] 

Section 2(107) of the CGST Act, 2017 defines “taxable person” as: 

(107) ―”taxable person” means a person who is registered or liable to be registered under section 22 or section 24; 

Analysis of the Provisions of Law:

Based on the above definitions, a checklist of questions need to be followed so as to determine two things namely:

1. Whether a supply is a “Mixed Supply” or not?

2. Whether a supply is a “Composite Supply” or not?

Checklist for determining whether a supply is a Mixed Supply or a Composite Supply.

Q. No. Questions Suggested Answer Answer
1.1 Are there two or more supplies of Goods and/or Services? Yes
1.2 If the above answer (for Q1.1) is “Yes”, then you may go ahead with this question.

Are the above two or more supplies, supplied together?

Yes
2. If the above answer (for Q1.2) is “Yes”, then you may go ahead with this question.

Are the above supplies, made by a Taxable Person?

Yes
3. If the above answer (for Q2.) is “Yes”, then you may go ahead with this question.

Are the supplies made for a Single Price?

Yes
4. If the above answer (for Q3.) is “Yes”, then you may go ahead with this question.

Are the above supplies, “naturally bundled” and supplied in conjunction with each other in the ordinary course of business?

No = Mixed Supply

 

 

Yes = Composite Supply

Follow up questions/illustrations to clear one’s doubts:

D supplies different goods under one invoice with price of each goods indicated separately and separate indication of applicable rate of tax for each goods. Is Mr. D making a “Mixed Supply”?

1. Although Mr. D makes supply of two or more goods, and although such goods are supplied under one invoice, since the said supply is not for a single price but consists of individual prices with their respective applicable rates, it can neither be termed as a mixed supply nor as a composite supply.

2. D is a Taxable person. On the occasion of Deepavali, Mr. D offers a basket of goods in his store called: “The Cleaning Kit”. The basket consists of 3 different Soaps, 3 different shampoos, 2 different detergent powders, 1 Phenyl bottle, 1 floor cleaner and 1 pair of rubber gloves. The basket is offered at Rs. 300 + GST. Is the supply of basket by Mr. D, a Mixed Supply? What will be the GST Rate applicable for such supply?

3. Since all the 5 characteristics of a Mixed supply are satisfied, such supply shall be considered as a Mixed supply.

  • Characteristics of a Mixed Supply:

1. There should be TWO or more SUPPLIES of GOODS and/or Services.

2. Two or More TAXABLE supplies should be SUPPLIED TOGETHER.

3. The SUPPLIES should be made by a TAXABLE PERSON.

4. The SUPPLIES should be made for a SINGLE PRICE.

5. The Supplies SHOULD NOT BE A COMPOSITE SUPPLY, i.e. they SHOULD NOT BE naturally bundled.

The rate applicable for such supply shall be the highest rate amongst the rates applicable to such individual goods when supplied on an individual basis. i.e. let’s assume that following rates are applicable for the goods individually:

Soap – 12%(Assumed)

Shampoo – 18%(Assumed)

Detergent – 5%(Assumed)

Phenyl – 5%(Assumed)

Floor Cleaner – 12%(Assumed)

Rubber Gloves – 5%(Assumed)

Thus in the given case, since the highest rate amongst the applicable rates for goods is 18% (as charged for Shampoo), the entire basket would be charged at 18% gst.

Blackk Spaloon provides grooming and beautician services to their customers. Blackk Spaloon provides a Hair Cut service for a package of Rs. 300. The package consists of Shampooing of hairs, head massage & a hair-cut. Is the supply by Ms. Blackk Spaloon, a Mixed Supply?

Whether a supply is a Mixed Supply or a Composite Supply is determined based on the characteristics of each transaction. Both Mixed Supply and Composite Supply have 4 common characteristics and only one difference. The difference is: Whether a supply is a Naturally Bundled supply or not. Naturally Bundled is not defined in the provisions of the Act, however, it is explained as a combination of supplies made in the ordinary course of business so as to enable the effective supply of the principal supply. In the given case, the principal supply is the service of hair-cut, while the service of shampooing of hair and head massage are auxiliary to the principal supply i.e. they are made so as to enable the effective supply of hair-cut service. If this is the normal practice in the industry and if these other services are inevitable for the effective supply of the main service i.e. hair-cut service, then such a supply can be called as naturally bundled and thus will be considered as a composite supply.

Alternative interpretation:

If such provision of different services isn’t the normal practice in the industry and if these other services are independent of each other, then they can’t be considered as naturally bundled and thus can be interpreted as mixed supply.

Conclusion & Recapitulation:

Thus we conclude that, “Mixed Supply” is defined under section 2(74) of the GST Law, and it consists of following 5 major characteristics:

Characteristics of a Mixed Supply:

1. There should be TWO or more SUPPLIES of GOODS and/or Services.

2. Two or More supplies should be SUPPLIED TOGETHER.

3. The SUPPLIES should be made by a TAXABLE PERSON.

4. The SUPPLIES should be a SINGLE PRICE.

5. The Supplies SHOULD NOT BE A COMPOSITE SUPPLY, i.e. they SHOULD NOT BE naturally bundled.

We also conclude that, “Composite Supply” is defined under section 2(30) of the GST Law, and it consists of following 5 major characteristics:

Characteristics of a Composite Supply:

1. There should be TWO or more SUPPLIES of GOODS and/or Services.

2. Two or More supplies should be SUPPLIED TOGETHER.

3. The SUPPLIES should be made by a TAXABLE PERSON.

4. The SUPPLIES should include ONE PRINCIPAL SUPPLY.

5. The Supplies SHOULD BE NATURALLY BUNDLED in the ordinary course of business, one of which is a principal supply.

We further conclude that, the only points of difference between a “Mixed Supply” and a “Composite Supply” is:

1. Whether the supply is naturally bundled in the ordinary course of business?

2. Whether there is ONE principal supply amongst the naturally bundled supply?

For a supply that is naturally bundled in the ordinary course of business, it would constitute a “Composite Supply”. For a supply that is NOT naturally bundled in the ordinary course of business, it would constitute a “Mixed Supply”.

Disclaimer: This article is intended to be referred for academic purposes only and shall not be used as a definitive opinion on the subject. Laws and Legal standings are subject to frequent changes. One should consult an expert on the subject to arrive at the current standing of the law and its applicability to any person.

Author Bio

Qualification: CA in Practice
Company: N/A
Location: Ahmedabad, Gujarat, India
Member Since: 11 Mar 2021 | Total Posts: 2

My Published Posts

More Under Goods and Services Tax

Leave a Comment

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

Search Posts by Date

April 2021
M T W T F S S
 1234
567891011
12131415161718
19202122232425
2627282930