Goods and Services Tax (GST) is a comprehensive indirect tax that was introduced in India on 1st July 2017. GST has replaced many indirect taxes that were levied by the state and central governments. One of the key features of the GST regime is the treatment of mixed and composite supplies. In this article, we will explore the basic definitions of these two concepts and their implications for businesses.
A mixed supply is a combination of two or more individual goods or services that are supplied together in a single transaction. For example, if a restaurant serves a thali that includes various dishes, such as rice, dal, vegetables, and bread, it is a mixed supply. Another example is a gift hamper that includes chocolates, flowers, and a teddy bear. In both cases, the individual items are supplied together in a single transaction.
A composite supply is a combination of goods or services that are naturally bundled together and supplied in the ordinary course of business. For example, a company that sells a computer with a keyboard and mouse is making a composite supply. The computer, keyboard, and mouse are naturally bundled together and are supplied as a single product. Another example is a package tour that includes transportation, accommodation, and meals. In both cases, the goods or services are supplied together as a single product in the ordinary course of business.
The treatment of mixed supplies and composite supplies under GST is different. A composite supply is treated as a supply of the principal supply, while a mixed supply is treated as a supply of the individual goods or services. Let's understand this with an example.
Suppose a restaurant offers a thali that includes rice, dal, vegetables, and bread for Rs. 200. The price of each item if sold separately is as follows: rice - Rs. 50, dal - Rs. 40, vegetables - Rs. 60, and bread - Rs. 30. In this case, the thali is a mixed supply, and the restaurant has to charge GST on each item separately.
On the other hand, if a restaurant offers a set meal that includes a thali with rice, dal, vegetables, bread, and a soft drink for Rs. 250, it is a composite supply. The restaurant has to charge GST on the entire set meal, and the rate of GST will be determined by the principal supply, which is the thali.
It is important to note that the rate of GST for a composite supply will be the same as the rate of GST for the principal supply. In the above example, if the rate of GST for the thali is 5%, the rate of GST for the set meal will also be 5%.
The key difference between mixed supplies and composite supplies is that in a mixed supply, the individual goods or services are supplied together in a single transaction, while in a composite supply, the goods or services are naturally bundled together and supplied in the ordinary course of business.
Another difference is in the treatment of GST. In a mixed supply, GST is charged on each individual item separately, while in a composite supply, GST is charged on the principal supply only.
Mixed supplies and composite supplies are two concepts that small and medium-sized businesses need to understand to comply with the GST regime. A composite supply is a combination of goods or services that are naturally bundled together and supplied in the ordinary course of business, while a mixed supply is a combination of two or more individual goods or services that are supplied together in a single transaction. The treatment of these two concepts under GST is different, and it is important to understand the implications for businesses.
By understanding the basics of mixed supplies and composite supplies, businesses can ensure that they comply with the GST regime and avoid any penalties or fines. As GST is a complex tax regime, it is advisable to seek professional advice to ensure compliance and avoid any legal issues.
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