The concept of Composite and Mixed Supply

The GST Act has two most unique concepts of supply and these are Mixed Supply and Composite supply. Whether the nature of the supply is Composite or Mixed also determines that rate of GST to be charged. 

The definition of Composite supply is given in Section 2(30) of the CGST Act, 2017:-

(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;

The definition of Mixed supply is given in Section 2(74) of the CGST Act, 2017:-

(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;

The taxability of Mixed and Composite supply is given in Section 89(a) and Section 8(b). Let's See:

Section 8:- The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-

(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) Mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

1. COMPOSITE SUPPLY AND TAX RATE

What is composite supply:-

The composite supply following are must:-

Principal Supply Section 2(90):-

(90) 'Principal supply'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.

Let us try to understand with the help of an Example which itself is given in the Section which has defined the

Composite 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.

Here see the definition of Principal Supply

The principal supply is 'goods'say edible oil and now the other supply which are naturally bundled with this principal supply are Packing Material, Transport of Goods and Insurance of the Goods. Now you can imagine in this transaction the supply of Packing Material, Transportation and Insurance if the supply of goods is not there. Hence the supply of Goods is principal supply and other supplies are naturally bundled with it.

If the supply is composite supply then the If the supply is composite supply satisfying all the requirements mentioned above then the whole supply shall be treated as principal supply and the whole supply will attract the rate of tax applicable to Principal Supply.

So please note that if a supply is composite supply then the whole supply will attract the rate of tax which is applicable to principal supply.

Let us try to understand this concept of Rate as under:-

3 commodities are supplied in a Composite supply C-1, C-2 and C-3 and principal supply is C-1. The rate of tax for C-1 is 5%, C-2 is 28% and C-3 is 12% then whole supply will attract the rate of 5% which is applicable of Principal supply.

OTHER EXAMPLES OF COMPOSITE SUPPLY

It must be noted here that there should be a Single price of whole the supply to make it composite supply if it is satisfying all the other conditions of composite supply.

Here it should be noted that Works contract and Restaurant supplies are very good examples of the Composite supply but the GST Act, has specifically categorized them as service and also notified the separate rate of tax for them.

2. MIXED SUPPLY AND TAX RATE

The constituents of the mixed supply are as under:-

Two or more supplies having individual identity, not dependent of each other, are supplied on a single price is called mixed supply. Let us try to understand it with the help of an Example which is also given with the definition of the Mixed 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.

If a supply is a mixed supply then it will attract the highest rate of Tax which is attributable to any constituents of the mixed supply.

Let us try to understand this concept with the help of an Example:

3 commodities are supplies in a Mixed supply C-1, C-2 and C-3 and the rate of tax for C-1 is 5%, C-2 is 28% and C-3 is 12% then whole supply will attract the highest rate of 28%.

OTHER EXAMPLES OF MIXED SUPPLY

DEPARTMENTAL FAQ'S on Composite and Mixed Supply:

Q1.What are the different types of supplies under the GST law?

Ans. (i) Taxable and exempt supplies.
(ii) Inter-State and Intra-State supplies,
(iii) Composite and mixed supplies and
(iv) Zero rated supplies.

Q2.What is composite supply and mixed supply? How are these two different from each other?

Ans. Composite supply is a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are bundled in natural course and are supplied in conjunction with each other in the ordinary course of business and where one of which is a principal supply. For example, when a consumer buys a television set and he also gets warranty and a maintenance contract with the TV, this supply is a composite supply. In this example, supply of TV is the principal supply, warranty and maintenance service are ancillary.

Mixed supply is combination of more than one individual supplies of goods or services or any combination thereof made in conjunction with each other for a single price, which can ordinarily be supplied separately. For example, a
shopkeeper selling storage water bottles along with refrigerator. Bottles and the refrigerator can easily be priced and sold separately.

Q3. What is the treatment of composite supply and mixed supply under GST?

Ans. Composite supply shall be treated as supply of the principal supply. Mixed supply would be treated as supply of that particular goods or services which attracts the highest rate of tax.