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what is composite supply under gst



Composite and mixed supply – In the GST system, for levying GST on any goods or services, it is first seen whether the goods or services have actually been supplied or not.

If there is supply of goods or services, then GST will be levied on it. The tax rate for all goods or services has been specified in the GST Act, according to which the supply of any goods or services can be taxed.

If the same goods or services are being supplied, then you will not face any problem in levying GST on it.

However, in many cases, two or more goods or services are supplied together at different rates of tax. For example, the supply of chocolates, sweets, balloons in a charger or a gift pack with mobile or any other thing with one thing free etc.

In such a case, at what rate GST will be levied on which goods or services, it can be a lot of trouble.

Such situations have been named as composite or mixed supply in the GST law . In today's article (composite and mixed supply), we will discuss how the GST rate will be determined in such supplies.

what is composite supply under gst – What is composite supply under GST?

In GST law both composite supply and mixed supply are separate. The most important thing to differentiate between the two is to see whether the supply of a goods or services is “natural bundled” or not “natural bundled” in normal business practice.

Composite supply will be considered as –
  • A supply consisting of two or more goods or services or a combination of both,
  • This supply should be “naturally bundled” in normal business practice,
  • Such a supply has a "principal supply".

If all these three conditions are fulfilled, then it will be considered as a composite supply.

What is the principal supply?

In the supply of two or more goods or services, the supply of which of the goods or services constitutes the largest element and the other goods or services shall only be ancillary thereto, the supply of such goods or services shall be deemed to be the principal supply.

Principal supply can also be seen as a supply of two or more goods or services which cannot be supplied separately.

(example of composite supply ) –
  • Meals, insurance are also included with the ticket in Jaipur to Delhi flight, then it will be considered as bundled supply. In this case the principal supply will be considered as passenger transportation, as the meals and insurance are being provided only for the convenience of the passenger. That is, it is being given only as an assistant to the principal supply.
  • Warranty or guarantee or insurance is provided with air conditioner or any other item, then it is also a “bundled supply”, in this case it will be considered as composite supply as the supply of air conditioner is the main supply and warranty or guarantee is only for its as an assistant. Without the supply of the Air Conditioner, no warranty or guarantee can be given. Therefore, the principal supply will be considered as the supply of the air conditioner.

Works contract and restaurant service are the best examples of composite supply, but the GST law prescribes different rates for these two types of supplies. However, before GST, these two were treated as composite supplies.
Gst rate for composite supply –

In the case of composite supplies, the rate of GST will be charged for the principal supply, because if the principal goods or services are not supplied, there will be no such supply.

For example, if the charger and other accessories are supplied with the mobile, then in this case the GST rate of the mobile will be taken for taxation, because other accessories are only ancillary to the mobile. In this case the supply of mobile is the principal supply.

How to know whether the services are “natural bundled” or not natural bundled –

For any supply of goods or services to be considered as composite supply, the most important thing is that the supply should be natural bundled.

If the supply is not natural bundled, then all these goods or services will be taxed at different rates.

There is no fixed formula to find out whether a service is natural bundled in normal business practice, but there are a few things that can be done to find out.
like -
  • If the majority of the recipients of a service expect that a service will be provided in a package, the services provided in such a package will be considered naturally bundled.
  • Most of the service providers in an area provide some kind of services in the package itself, then such services will also be considered as natural bundled.
  • Providing a service in a package helps in business , then it will also be considered as natural bundled services.
  • If two or more services are provided in a package and such services are written on these packages, due to which these services cannot be provided separately, then this will also be considered as an example of natural bundled services.

Mixed Supply Under GST –

A supply of two or more goods or services or a combination of both shall be deemed to be a mixed supply when it is not naturally bundled and these goods or services may also be supplied separately.

If any supply is natural bundled, then it will be treated as composite supply and if natural is not bundled, then it will be treated as mixed supply.

like -
  • If a shopkeeper gives free water bottles along with the refrigerator, then this supply is not naturally bundled, as the refrigerator and water bottles can also be supplied separately. Hence this supply will be treated as mixed supply.
  • All the three floors of a flat are given on rent to any one person with a single rent deed, for which a lump sum amount is charged and which he uses for different purposes, then it is also considered a case of mixed supply. Because these flats could also be given on rent separately.

taxation of mixed supply

The supply of 2 or more goods and services which is deemed to be mixed supply, shall be taxed on mixed supply at the highest rate of those goods or services.

For example, if any 3 types of goods or services are being supplied together and the tax rate on them is 5%, 14% and 28% and this supply is a mixed supply, then at the rate of 28% on the value of such supply. GST will be levied .