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Understanding Composite and Mixed Supply Under GST

Composite and Mixed Supply Under GST: The Supplies of Goods and Services are clearly defined under GST, Similarly, Rates and Place of Supply rules for every Goods/services are also Defined. But In some business practices, all supplies under GST are not such simple and clearly identifiable supplies.

Some of the supplies will be a combination of goods or combination of services or a combination of goods and services, therefore, the GST Law identifies Composite Supply and Mixed Supply under GST and provides certainty in respect of tax treatment under GST for such supplies.

Composite Supply Under GST

  • Composite supply under GST 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. For e.g., Machinery (supply of goods) is provided along with a warranty and maintenance contract (supply of service). Here, there are two or more supplies, naturally bundled and the supply of machines is the principal supply.
  • “Principal Supply in GST” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.

Some More Examples of Composite Supplies

  • Goods are packed/repacked, loaded/unloaded, staked/re-staked, and transported/ transhipped with insurance.
  • Booking a train ticket which includes meals and insurance also,
  • A works contract: It is a classic example of composite supply. But to avoid the confusion under earlier tax law, GST Act clearly clarifies works contract as a supply of service with specific tax rates
  • The restaurant business provides a bundled supply of preparation of food and serves the same.

Mixed Supply Under GST

Mixed Supply in GST 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.

For example, a supply of stationery packs containing crayons, paints, brushes, drawing books, etc. supplied at a single price by the seller together as a package is a mixed supply

Note – 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.

Some More Examples of Mixed Supplies

  • A Diwali gift box consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices supplied for a single price is a mixed supply,
  • A free bucket with detergent powder
  • Portable water with Food in restaurants

 Differences between mixed and composite supplies on the basis of main item and taxability

ParticularsComposite SupplyMixed Supply
Main itemPrincipal itemAn item with the highest tax rate
Tax rate applicableTax rate of the principal itemHighest tax rate of all the items

Time of Supply –

Time of supply in case of composite supply:-

If the principal supply is a service (for example, air transport and food on board) then the composite supply will be treated as a supply of services. The provisions relating to the time of supply of services will apply.

Similarly, in the case of purchasing and transporting goods, the supply of goods is the principal supply. The composite supply will qualify as a supply of goods and the provisions relating to the time of supply of goods will apply.

Time of supply in case of mixed supplies:-

If the highest tax rate belongs to a service then the mixed supply will be treated as the supply of services. The provisions relating to the time of supply of services would be applicable.

Similarly, if the highest tax rate belongs to goods then the mixed supply will be treated as a supply of goods. The provisions relating to the time of supply of services would be applicable.

Note: This document had been written to provide an update in simple/ lucid language. The Author shall not be responsible for any decision made based on the content of this document. Care has been taken to produce authentic and reliable information however the users are expected to obtain professional advice before implementing.

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