Composite supply is a type of supply under the Goods and Services Tax (GST) system in India, where two or more goods or services are supplied together in a bundle, where the components are naturally bundled and supplied together for a single price. In composite supply, one of the goods or services is considered as the principal supply, and the tax rate of the principal supply is applicable to the entire supply.
For example, if a restaurant supplies a meal comprising food, drinks, and service, the entire supply is considered as a composite supply, with the principal supply being the food. The tax rate applicable to the food is then applied to the entire supply.
The GST Act provides that a composite supply must satisfy the following conditions:
1. The supplies must be naturally bundled.
2. They must be supplied together in the ordinary course of business.
3. One of the supplies must be the principal supply.
4. The tax rate applicable to the principal supply must be applied to the entire supply.
It is important for businesses to correctly identify composite supplies and the principal supply to ensure that the correct tax rate is applied, and they comply with the GST regulations. Failure to comply with GST regulations can result in penalties and fines.
Mixed supply is another type of supply under the Goods and Services Tax (GST) system in India, where two or more individual goods or services are supplied together in a bundle, but they do not qualify as a composite supply. In a mixed supply, the components are not naturally bundled together, and are supplied together for a single price, as a result of a customer or vendor decision.
In a mixed supply, the tax rate applicable to the highest-taxed individual supply in the bundle is applied to the entire supply. For example, if a supplier offers a package deal for a laptop and a printer, where the laptop is taxed at 18% and the printer is taxed at 28%, the tax rate of 28% applies to the entire package deal.
The GST Act provides that a mixed supply must satisfy the following conditions:
1. Two or more individual goods or services are supplied together for a single price.
2. The goods or services are not naturally bundled together.
3. The goods or services are supplied in conjunction with each other.
It is important for businesses to correctly identify mixed supplies to ensure the correct tax rate is applied, and they comply with the GST regulations. Failure to comply with GST regulations can result in penalties and fines.
The tax liability on composite and mixed supply under the Goods and Services Tax (GST) system in India is determined by the principal supply. The principal supply is the main or predominant supply among the supplies in the composite or mixed supply, and it determines the applicable tax rate for the entire supply.
For composite supply, the tax rate applicable to the principal supply is applied to the entire supply. The other goods or services supplied in the composite supply are taxed at the same rate as the principal supply.
For mixed supply, the highest tax rate applicable to any individual supply in the bundle is applied to the entire supply. This is because the goods or services supplied in a mixed supply are not naturally bundled together, and are supplied together as a result of a customer or vendor decision.
It is important for businesses to correctly identify the principal supply in a composite supply or the highest-taxed individual supply in a mixed supply, to ensure that the correct tax rate is applied, and they comply with the GST regulations. Failure to comply with GST regulations can result in penalties and fines.
Here are some frequently asked questions about mixed and composite supply under the CGST Act, 2017:
What is a mixed supply?
A mixed supply is a supply of two or more goods or services, made in conjunction with each other by a taxable person for a single price, which is not a composite supply.
What is a composite supply?
A composite supply is a supply of two or more goods or services that are naturally bundled and supplied in conjunction with each other by a taxable person for a single price.
How are mixed and composite supplies taxed under GST?
In a composite supply, the entire supply is taxed at the rate applicable to the principal supply. In a mixed supply, the tax rate applicable to the highest taxed supply in the mix is applied to the entire supply.
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