GST

Mixed Supply & Composite Supply under GST

Mixed and Composite Supply

The concept of GST registration includes both supplies which are related as well as supplies which are not related. The supplies of more than one good or service can be termed as mixed or composite supply. Under the GST regime, the concept of composite supply is almost similar to service tax. However, the case of mixed supply the concept is not the same as that of composite supply is a new one.  This article is explaining Mixed and Composite Supply under GST in India.

Mixed Supply & Composite Supply

What is Supply under GST?

The term supply refers to the various forms of supply of services and goods. The term supply has been made for the consideration at the time of business which comprises of different aspects such as barter, sale, exchange, transfer, license, rent, disposal and lease. There are some activities which have been prescribed under Schedule I of the Goods and Service Tax Act will be regarded as supply. The term supply includes the import of service with consideration.

What is a Mixed Supply under GST?

The concept of mixed supply is also known as a bundled supply. This supply can be termed as a combination of services and goods. The aforesaid concept was mainly focused on service tax where there was a combination of more than two services in a single price. The following are some of the features of mixed supply;

  • It is a combination of two or more goods or service which is made together for a single price.
  • In mixed supply, every good or service must be supplied separately and are not dependent on each other.
  • Under the GST registration scheme, the tax rate of the product or service in mixed supply will be the highest rate of tax.

For example, a gift box containing sweets, cakes, dry fruits, fruit juices, cakes, chocolates, aerated drinks etc supplied for a single price will be termed as a mixed supply as all these aforesaid products can be sold separately. As the highest GST rate is 28% for aerated drinks, the same percentage of tax will be applicable to the entire supply of the gift box.

How it can be determined that the Supplies are Combined and they cannot be Separated?

The questions of combined supply generally in the course of business are dependent on the normal practices that are being followed in the industry. The following are some of the ways for the identification of the same;

  • If the purchasers expect to get such services in package form and then the same package will be termed as naturally combined or mixed. This can be better understood with the help of an example. For example, most of the business tries to look for combined hotel accommodation, food, and auditorium.
  • If some of the service providers will offer a package of services then only it can be termed as naturally combined or bundled. This also can be better understood with the help of an example. For example, mixed or combined food and air transport in most of airlines.
  • The feature of most of the services in combined and bundled form will also help for the identification if the services are mixed or not.
  • If there are some main services as well as ancillary services then it can be considered as combined or bundled service. This can be better understood with the help of an example. For example, in most of the five-star hotels, the laundry services are offered freely during the stay at the hotel. In this case, the rent of the room and offering of laundry service are primary service and ancillary service respectively. However, a person cans the advantage of laundry service only if he is staying at the hotel.
  • Apart from the above-mentioned indicators for mixed supply, the other indicators of mixed services in the day to day operations of a business are as follows. (please note the below-mentioned indicators cannot be considered as a foolproof indicators for identification of mixed or bundled service):
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Even if the customers want for less, there is a single price for the package of the service.

The package contains the advertisement of its components

There is no option of availability of components separately

What is Composite Supply under GST?

Composite supply refers to the composition of two or more goods or service which are naturally combined and supplied accordingly in the day to day operation of the business. Out of which one is principal supply which suggests that the aforesaid product is basically sold as a combined good or service. This good or service cannot be supplied separately.

How to determine if it is a Composite Supply?

The supply of the goods or service will be considered as composite supply if it fulfills the below-mentioned conditions and criteria’s;

  • The supply of two or more goods or services is together.
  • The supply is made naturally in a bundle. This means that if the goods or services are generally offered together in the day to day course of the business.
  • The good or service cannot be separated.

For example The goods are packed are sent having an insurance contract. Here, the supply of the goods, transport, packaging material and insurance will be termed as composite supply. In this case, transport, insurance, and packaging of materials cannot be separated if there will be no goods for the purpose of supply.

Therefore, it can be concluded that the good or service supply will be considered as the principal supply. It is to be noted that the liability of tax will be on the principal supply which will be the rate of GST on the goods. Apart from that if the second condition does not fulfill then it will be termed as a mixed supply.

How to determine if it is a Composite Supply or Mixed Supply?

It is necessary to determine if the supply is a composite of mixed. Supply can be considered as mixed only if it is proved that it is not a composite supply. The goods and services can be sold separately of the supply are bundled in the course of ordinary business naturally, in that case, it will be termed as mixed supply.

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For example, if someone purchases cakes, dry fruits, chocolate, aerated water, and fruit juices in a form of a gift it will be considered as a mixed supply and all the aforesaid goods will be liable of tax separately.

For more information, related to the GST registration process and concept of Mixed and Composite Supply you can contact the team of Enterslice.

Differences between Mixed and Composite Supply

  • The composite supply can be termed as the supply of the services. In such situations, the conditions and provisions of the supply of service in relation to time will be applicable. Similarly, in the case of transporting and buying of goods, the principal supply will be of supply of main goods. The concept of composite supply will be applicable to qualify the goods supplied and conditions of supply of goods in relation to time will be applicable.
  • In the case of mixed supplies, when the rate of tax is high for a service then the concept of mixed supply will be applicable for the supply of services. Accordingly, the conditions in relation to the time of supply of services will also be applicable. In the same way, if the rate of tax is meant for goods then the mixed supply will be considered for the supply of goods and the provisions in relation to the supply of goods will be applicable.

Examples of Mixed and Composite Supply

The following are some of the examples to make a better understanding of the concept of the mixed and composite supply.

Example 1

Train tickets Bookings:

In case of booking a train ticket in a Rajdhani train, it generally includes the cost of the meal along with the fare of the journey. It is considered as a composite supply as the products will not be served or supplied separately to the customer. Here, it is to be noted that you cannot buy the meal without the ticket. In this case of booking train ticket, the traveling of the customer or passenger will be considered as principal supply.

In the aforesaid example, the rate of tax will be applicable to the principal supply which will ultimately liable for whole composite supply. Thus, as per the GST registration scheme, the GST rate applicable for the principal supplies i.e. the transportation of the customer by rail. The GST will be charged by IRCTC[1] for booking the train ticket.

Example 2:

Purchase of Washing Powder and Getting a free Bucket:

Most of the shops offer these kinds of attractive schemes for customers. This offer will be termed as mixed supply and ultimately does not satisfy the needs of the second condition. In this case, one can purchase washing powder or the bucket. However, to avoid any sort of confusion in the GST registration process, the GST act meant for GST Registration provides the clarification regarding the supply of services with particular rates of tax.

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The highest rate of GST will be applicable in this case on washing powder as the washing powder has the higher rate of GST which is 28% and also it will be considered as a mixed or bundled supply.

Example 3:

Works Contract

It can be said that a work contract is a complete package of services and transfer of goods. The best example for this will be the construction of a building where there will be a mixed supply of materials like cement, bricks, and with the engineer, architects and workers for construction of a building. For this, to avoid any sort of confusion in the GST registration process, the GST act meant for GST Registration provides the clarification regarding the supply of services with particular rates of tax.

Example 4:

Restaurant Business

Generally, Restaurant business supply composite services which include preparation of foods and serving them. It is to be noted that the restaurant business is one of the classic examples for composite supply. However, to avoid any sort of confusion in the GST registration process, the GST act meant for GST Registration provides the clarification regarding the supply of services with particular rates of tax.

For more information, related to the GST registration process and concept of Mixed and Composite Supply you can contact the team of Enterslice. Enterslice has a team of experts who will help you to get your GST registration in a hassle-free manner

Conclusion

From the above-provided information, it can be concluded that the supply of goods and services can be mixed or composite depending on the nature of the supply of goods and services. Apart from that, the concept of mixed and composite supply and its rates of tax are defined by the Council of GST. The rate of GST for every good and service has been defined under the law of Goods and Service Tax. In that case, if a person is engaged in the supply of certain goods or services the identification of rates is easy. In some cases, the supply of a service or goods may not be connected or may not be done.

Thus, it can be concluded that the concept of mixed and composite supply is very much important. This helps in determination of right Goods and Service Tax rate and also offers the exact treatment of tax under the regime of GST for supply.

For more information, related to the GST registration process and concept of Mixed and Composite Supply you can contact the team of Enterslice. Enterslice has a team of experts who will help you to get your GST registration in a hassle-free manner.

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