Mixed and Composite Supply under GST

Mixed and Composite Supply under GST

There has been numerous tax obligation which are introduced under the Goods and Services Tax by GST council and central government. The laws are defined in the draft model GST law in which there is a tax liability of Mixed and Composite supply under GST. The concept has been introduced entirely on a fresh basis with tax liabilities decided beforehand.

As when consumers buy several commodities or avail services at once, there are traders who intend to offer some more at a chargeable price making the deal overall compact. The practice prevails profoundly in various growing economies where more and more commodities are circulated. Practically, in today’s market scenario, a combination of goods and services are supplied together to attract more consumer.

By understanding the older system of taxation i.e. service tax this is called bundled service while under the GST law it can be classified as Composite supply and Mixed supply. However, the concept of mixed supply is a new introduction which assimilates widespread activities of multiple commodity selling within a package. This time, the government took a note of this fashion and made appropriate tax liability over it.

Also Read : GST for Beginners-A Free E-Book

Composite supply

Composite supply consists of two or more goods/services, which are naturally supplied with each other in the ordinary course of business and one of them is assumed as a principal supply. One must note that the overall package of good or service cannot be supplied separately and must be in a single package regardless of tax liability. In other words, goods and services are bundled owing to natural necessities. The elements in a composite supply of goods and services are dependent on the ‘principal supply’ of goods or services.

Principal supply means the supply of goods or services which constitute the predominant element of a composite supply and to which another supply is ancillary/secondary.

Now acknowledge that these following conditions are necessary for a composite supply:

  • Supply of two or more goods or services together, AND
  • It should be a natural bundle and they cannot be separated

For an extra understanding, it should be noted that If the second condition is not fulfilled then it becomes a mixed supply automatically. While for tax liability purpose, the tax rate applicable to the principal supply will be effected on the composite supply.

Let’s understand composite supply with an example:

Suppose a camera retailer sells DSLR camera along with a tripod bundled in a package. According to the model draft GST law, it will be considered as composite supply as it is a natural combination in the ordinary course of business for professional photography retailer to supply bundled packages of camera and tripod stand. In this case, the camera will be assumed as a principle supply while the tripod stand will be considered as ancillary supply with the camera. Now, let’s assume that the DSLR camera attracts 28% of GST while the photography tools like tripod stand come under 18%. So, by going through the government instructions, the entire supply will be taxed at the rate of principle supply i.e. 28%.


Mixed supply

The concept of mixed supply has been introduced for the very first time to capture the market of extra circulating products via anonymous routes. The motion of mixed supply is being controlled by hefty dealers who stocks a lot of goods from different categories in order to gain profits anyhow. By coming to an authorised understanding of mixed supply, it is observed as two or more individual supplies which are a combination of goods or services packaged into a single bundle for a solitary price.

Now the factor which should be acknowledged for gaining the conception of the difference between composite and mixed supply is that, in the mixed supply, each of these items can be supplied separately and is not dependent on each other. This very point changes the meaning and terms between these two variants of supply.

In other words, the combination of goods or services are not bundled due to natural necessities, and they can be supplied individually in the ordinary course of business. For tax liability purpose, mixed supply consisting of two or more supplies shall be treated as a supply of that item which has the highest tax rate just as in the case of composite supply where also the highest rate was applicable regardless of items included.

Following points are considered for a supply to be under mixed category:

  • Bundled supply of two or more individual goods/services having different usage AND
  • Has no necessity upon each other.

Now lets under this concept with an example for a proper understanding:

Let’s assume that a store retailer offers a package of 3 items including, a pair of jeans, a school bag, and a wrist watch bundled as a kit and this kit is supplied for a single price while also concentrate on the factor that this bundled supply of all these items does not naturally necessitate the supply of other elements included in the package. So, drawing a conclusion from this, it will be termed as a mixed supply. Now, lets presume that the tax rates for all these three items are 12%, 5% and 28% respectively, and according to the draft model laws of GST, the highest tax rate of the commodity will be applicable over the package i.e. 28%. Hence, the package of mixed supply will be taxed at 28% in this particular case.


Author -Above content on GST has been contributed by renowned taxation web portal Tax Adda.


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