Introduction:

Section 8 of the GST act deals with the provision related to the tax liability on composite and mixed supply. GST is payable on individual goods or services or both at the notified rates. The application of rates poses no problem if the supply is of individual goods or services, which is clearly identifiable and such goods or services are subject to a particular rate of tax.

However, in certain cases, supplies are not such simple and clearly identifiable, and sometimes some of the supplies are a combination of goods or combination of services or combination of goods and services both and each individual components of such supplies may attract a different rate of tax. In such a situation tax liability on composite and mixed supply arises, which we shall discuss in this article.

Section 1: how to determine the tax liability on a composite and mixed supply under GST?

Tax liability on composite and mixed supply can be determined in the following ways

1. 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  
2. A Mixed supply comprising of two or more supplies shall be treated as supply of that particular supply, that attract higher rate of tax.

Section 2: What is composite supply under GST?

Composite supply means a supply made by a taxable person to a recipient and

1. Comprises two or more taxable supplies of goods or service or both, or any combination thereof.
2. Supplies that are naturally bundled and supplied in conjunction with each other, in the ordinary course of business.
3. Supply, one of which is a principal supply

This means that in a composite supply, goods or services or both are bundled owing to natural necessities. The elements in a composite supply are dependent on the Principle Supply.

Section 2: What is Principal supply?

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 (Section 2(90)).

Works contract and restaurant services are the examples of composite supplies.

Section 3: What is mixed supply under GST?

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 ( Sec.2(74) )

The individual supplies are independent of each other rand are not naturally bundled.

Example – A gift pack comprising of chocolates, candles, sweets and balloons, is an example of mixed supply.

 Section 4: What is the tax rate for composite supply and mixed supply under GST?

For the composite and mixed supply, the tax rate is – for composite supply the tax liability shall be rate of principle supply and for mixed supply tax liability shall be the rate applicable to the supply that attracts highest rate of tax.

Conclusion:

Specific rates for goods and services have been defined by the GST Council. composite and mixed supply is one of the key concept, and understanding of which will help in determining the tax liability of the supply. If you are supplying a particular good or a service rates are easy to identify. However, sometimes supply of a good and service may be connected or may be done together even though not connect, in such a situation the concept of composite and mixed supply arises. So the same has been discussed in this article, hope this article may be helpful, In future article,  we will try to bring in details about the tax liability on composite and mixed supply with examples.

Disclaimer: The content and views stated in this article is solely for informational purpose only.

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