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The provision of two or more commodities or services might be classified as a ‘composite supply’ or a ‘mixed supply.’ This is a new GST concept that will encompass supplies manufactured together whether they are connected or not. In the GST framework, the idea of composite supply is akin to the concept of organically bundled services in the Service Tax Law. The notion of mixed supply, on the other hand, is wholly new. Every supply should include either products or services, or a combination of goods and services, or a combination of the two. In the event of all such combinations, the law states that such deliveries must be classified as either completely goods or wholly services for tax purposes. In this article, we’ll discuss composite and mixed supplies under GST.
Before we move further to discuss Section 8 Tax liability on composite and mixed supplies under GST Act, 2017, let us first understand about Mixed Supply and Composite Supply.
Concept of Composite Supply under GST
A composite supply is one that consists of two or more goods/services that are naturally combined and supplied together in the regular course of business, one of which is a primary supply. It signifies that the things are usually sold together. The goods are not available individually.
Identification of Composite Supply
If a supply of commodities and/or services meets the following characteristics, it is considered a composite supply:
- The provision of two or more goods or services concurrently;
- It is a natural bundle, i.e., goods or services are often delivered concurrently in the normal course of business.
- They are inseparable.
Applicability of Tax Rates on composite supply
The major supplier’s tax rate will be applicable to the total supply.
As an example, goods are package and insure before being shipped. A composite supply includes the supply of commodities, packing materials, transportation, and insurance. If there are no items to supply, insurance and transportation cannot takes place independently. As a result, the primary supply is the supply of commodities. The tax owed will be the tax on the primary supply, i.e. the GST rate on the products. If the second requirement is not meeting, the supply becomes mixed.
Concept of Mixed Supply
Under GST, a mixed supply is a combination of two or more commodities or services sold together for a single price. Each of these components may be given alone and is not reliant on the others.
A Mixed Supply will have the tax rate of the item with the highest rate of tax applied to it under GST.
A Diwali gift box that includes canned goods, candies, chocolates, cakes, dried fruits, aerated drinks, and fruit juices for a single price is an example of a mixed supply. All of these items are also available separately. Because aerate beverages have the highest GST rate of 28 percent, they will be recognise as the primary supplier, and the 28 percent will be applicable to the complete gift box.
The distinction between a Composite and Mixed Supply under GST
You must rule out the possibility that the supply is a composite supply. Only if a supply is not a composite supply can it be classified as a mixed supply. If the goods may be sold individually, i.e., if the supplies are not organically combined in the normal course of business, it is a mixed supply. For example, if a person purchases canned goods, candies, chocolates, cakes, dried fruits, aerated drinks, and fruit juices separately rather than as part of a Diwali gift box, it is not regarded a mixed supply. Everything will be taxed separately.
Importance of Composite and Mixed Supply under GST
The GST Council has established specific rates for products and services. The GST Law specifies the GST rate for each category of item and service. As a result, if you provide a certain commodity or service, charges are straightforward to recognise. However, the supply of an item and a service may be connected or performed concurrently even if they are not connected. Assume that an air conditioner is provided, as well as AC installation services. The GST Act specifies how such supplies are to be assessed. As a result, the concepts of composite supply and mixed supply become crucial. It aids in determining the exact GST rate and ensures that such supplies are under taxation uniformly under GST.
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Rates applicable for Composite and Mixed Supplies under GST
The following are the applicable rates for Composite and Mixed Supplies under GST:
- In the situation of Mixed Supply, the GST rate is: A mixed supply is define as the supply of an item; or service that is subject to a higher tax rate.As a result, the highest GST rate applicable to sweets, chocolate, and boxed juices will be applicable to the price of the entire pack.
- In the case of Composite Supply, the GST rate is: In the case of a composite supply, the GST rate applicable to the primary supply will be applicable to the whole amount of supply. For example, a 5% GST rate will apply to breakfast, however in the prior example; the GST rate mandated for the hotel room will apply to the entire amount paid to the client. Because the hotel room is the primary service.
Time of Supply of Composite and Mixed Supplies under GST
The following are the Time of Supply for Mixed Supply and Composite Supply respective-
Time of Supply in case of Mixed Supply:
There are two possibilities-
- Involves the supply of a service that is subject to higher tax rates than any other constituent supply – Would be regarded a supply of services; and hence provisions pertaining to the supply of services would apply.
- Involves supply of products subject to higher tax rates than any other constituent supply – Would be regarded a supply of goods; and hence laws relevant to a supply of goods would apply.
Time of Supply in case of Composite Supply
There are two possibilities-
- The primary supply is a supply of services — would be deemed a supply of services; and hence provisions pertaining to the supply of services would apply.
- The primary supply is a supply of goods — would be deemed a supply of goods; and hence provisions pertaining to the supply of goods would apply.
Conclusion
The taxability of supply would have to be decided on a case-by-case basis, taking into account each case’s facts and circumstances. When a supply includes the provision of both goods and services, and the value of such goods and services is represented separately, the goods and services are subject to tax at the rates applicable to such goods and services individually.
