This is a new concept introduced in GST which will cover supplies made together whether the supplies are related or not. The concept of composite supply in GST regime is similar to the concept of bundled services under Service Tax Law. With the implementation of GST it has become very important to understand the difference between Composite Supply and Mixed Supply.
First of all, we should understand the term supply. Definition of ‘supply’ Under section 2(92) read with section 3 ‘supply’ includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Section 2(30) of the GST Act defines Composite Supply as a supply 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.
Conditions for Composite Supply
Any supply of goods or services will be treated as composite supply if it fulfils BOTH the following criteria:
- Supply of 2 or more goods or services together, AND
- It is a natural bundle, i.e., goods or services are usually provided together in normal course of business. They cannot be separated.
Tax liability will be the tax on the principal supply i.e., GST rate on the goods. If the second condition is not fulfilled it becomes a mixed supply.
Example of Composite Supply
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.
Principal Supply is defined in Section 2(90) of the Act. It means the supply of that goods or service which constitute the predominant element of the composite supply.
Mixed supply under GST means two or more individual supplies of goods or services, or any combination, made together with each other by a taxable person for a single price. Each of these items can be supplied separately and is not dependent on any other.
For tax under GST, a mixed supply comprising two or more supplies shall be treated as supply of that item which has the highest rate of tax.
Example Of Mixed Supply
- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink 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.
- Many shops offer a free bucket with detergent purchased. This is a mixed supply as it does not satisfy the 2ndcondition, i.e., it can be sold separately. We can buy either just a bucket or just detergent. The highest rate of GST will then apply. Assuming that plastic buckets have the higher rate, this rate will apply on the whole mixed bundle.
Determination of tax liability of composite and mixed supplies
The tax liability on a composite or a mixed supply shall be determined in the following manner:
- 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.
- 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.