Tax on Composite & Mixed Supply | Section 8 | CGST Act 2017

Section 8- Tax liability on Composite and Mixed Supply-  Today I will discuss  provisions of Section 8 of CGST ACT 2017 in very simplified manner-

We all know-

1. 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.  

Composite supply under GST

1. The supply can be regarded as a composite supply if all conditions specified for a supply of a combination of goods and /or services to be treated as a composite supply are satisfied. Now let us discuss those conditions-

• The supply must be made by a taxable person.
• The supply must comprise 2 / more taxable supplies.
• The goods and / or services involved in the supply must be naturally bundled: The concept of natural bundling needs to be examined on a case to case basis.
• They must be supplied in conjunction with each other in the ordinary course of business:
• Only one of the supplies involved must qualify as the principal supply – Now what is principal supply – A principal supply is defined u/s 2(90) to mean the predominant element of a composite supply to which any other supply forming part of that composite supply is ancillary.

Where any of the aforesaid conditions are not satisfied, the transaction cannot be treated as a composite supply. 

2. All matters such as rate of supply , time of supply , place of supply etc shall be determined in respect of principal supply alone.

3. Examples to understand-

• 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.
• Supply of laptop and carry case of same company
• Supply of health care services along with medicament. Para 5(3) of Circular No.32/06/2018-GST dated 12.02.2018 clarifies that “food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of health care and not separately taxable”.
• Re-treading of tyres– In re-treading of tyres, which is a composite supply, the pre-dominant element is the process of re-treading which is a supply of service, and the rubber used for re-treading is an ancillary supply.
• ADVANCE RULING ON COMPOSITE SUPPLY:- AAR, West Bengal vs. Switching Avo Electro Power Ltd.-  Whether if a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies – Held, yes – Whether where UPS and battery are supplied as separate goods, but a single price is charged for combination of goods supplied as single contract, supply of UPS and battery is to be considered as mixed supply within meaning of section 2(74), as they are supplied under a single contract at a combined single price – Held, yes.
  

Mixed Supply under GST

Now let us discuss characteristics of Mixed Supply-

• It involves 2 / more individual supplies – A mixed supply can include both taxable and non taxable supplies
• It is made by a taxable person
• The supply is made for a single price
• The supply does not constitute a composite supply
• The matters such as time of supply, invoicing, place of supply, value of supply, rate of tax applicable to the supply, etc. shall all be determined in respect of that supply which attracts the highest rate of tax.

Examples to understand-

• 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.
  

There is no prescribed tests for determination of mixed and composite supply but ask yourself few questions to determine mixed and principal supply. 

ADVANCE RULING ON COMPOSITE SUPLY/MIXED SUPPLY-

AAR, Haryana vs. Paras Motor Industries–Whether activity of fabrication and fitting and mounting of bus bodies on chassis supplied by other party is a composite supply of service with supply of goods, i.e., bus bodies, being principal supply and same is covered under HSN Code 8707 – Held, yes 

Test for Readers – Now let us check how much readers have understand the above analysis- For Instance , My Friend purchased fresh vegetables and fruits from store which offers home delivery but asked for an added charge . Now question arises – It is clear that supply of goods and services but Composite supply or Mixed Supply ???

Post your answers in comment box. Have a nice day  ….