Goods and Services Tax (GST) has brought a significant change in the Indian taxation system. GST is a comprehensive indirect tax levied on the supply of goods and services in India. One of the features of GST is mixed supply, which has a different tax treatment post-GST. In this article, we will take a closer look at mixed supply and its levy post GST.
Mixed supply refers to a combination of two or more goods or services sold together in a single transaction. It is a bundle of different items that are supplied to the buyer in a single package. Mixed supply is different from composite supply, which is a package of goods or services that are supplied together in the ordinary course of business. In composite supply, there is one principal supply, and all other supplies are ancillary to it.
Under GST, the tax on mixed supply is levied on the principal supply. The principal supply is the supply which gives the mixed supply its essential character. In other words, the supply which constitutes the majority of the package determines the tax liability for the entire package. The tax rate on the principal supply is applicable on the entire mixed supply.
For example, if a package contains a mobile phone, earphones, and a power bank, the mobile phone is the principal supply as it constitutes the majority of the package. The tax rate applicable on mobile phones will be applicable on the entire package.
Valuation of mixed supply is done in the following manner:
For example, if the value of a mobile phone is INR 10,000, the value of earphones is INR 500, and the value of the power bank is INR 1,500. The total value of the package will be INR 12,000. If the tax rate on mobile phones is 18%, the total tax payable on the package will be INR 2,160 (18% of INR 12,000).
The tax liability on mixed supply is calculated as follows:
For example, if the tax rate on mobile phones is 18%, and the tax rate on earphones and power banks is 12%, the tax rate on the package will be 18% + 12% = 30%. The tax payable on the package will be calculated at the rate of 30% on the total value of the package.
Mixed supply is a common practice in business where two or more goods or services are supplied together in a single package. The tax liability on mixed supply is determined based on the principal supply, which gives the package its essential character. The tax rate on the principal supply is applicable on the entire package. The value of the package is determined by adding the value of the principal supply and other supplies. The tax liability on the package is calculated by adding the tax rate on the principal supply and other supplies.
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