In India, the Goods and Services Tax (GST) Act was introduced in 2017 to simplify indirect taxation. The GST system has unified the many different taxes that were previously levied by different states, and it has made it easier for businesses to comply with tax laws. However, determining the nature of the supply is still a complex task, especially when it comes to composite and mixed supplies.
Before we dive into the true tests for determining composite and mixed supply under GST laws, let's first understand the difference between the two terms.
A composite supply is a combination of goods or services that are naturally bundled together. In other words, composite supply is a supply of more than one goods or service, which are naturally bundled and supplied in conjunction with each other. For example, when you order a pizza, it is a composite supply of the pizza base, tomato sauce, cheese, vegetables, and meat (if any).
A mixed supply is a combination of two or more individual supplies of goods or services that are supplied together for a single price, but are not naturally bundled. The individual supplies in a mixed supply can be supplied separately as well. For example, when you buy a computer, it is a mixed supply of the computer hardware and software.
Now that we have understood the difference between composite and mixed supplies, let's look at the true tests for determining composite and mixed supply under GST laws.
As per Section 2(30) of the GST Act, "composite supply" means a supply made by a taxable person to a recipient, consisting of two or more taxable supplies of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Therefore, to determine whether a supply is a composite supply, the following conditions must be met:
1. The supply must consist of two or more taxable supplies of goods or services or both.
2. The supplies must be naturally bundled and supplied in conjunction with each other. This means that the items are commonly sold or used together in the ordinary course of business.
3. One of the supplies in the bundle must be a principal supply. A principal supply is the main supply that gives the bundle of goods or services its essential character. In other words, it is the item that the consumer would primarily be interested in acquiring.
For example, if a supplier is selling a laptop along with a carrying case, the laptop is the principal supply, while the carrying case is the ancillary supply. Similarly, if a restaurant serves a thali, the rice or roti is the principal supply, while the other items in the thali are ancillary supplies.
As per Section 2(74) of the GST Act, "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
Therefore, to determine whether a supply is a mixed supply, the following conditions must be met:
1. The supply must consist of two or more individual supplies of goods or services or both.
2. The individual supplies must be made in conjunction with each other, i.e., they must be supplied together as part of a single package for a single price.
3. The supplies must not be naturally bundled together, i.e., they can be sold separately as well.
For example, if a supplier is selling a computer along with a printer, but the computer and printer can be purchased separately as well, then it is a mixed supply.
Determining whether a supply is a composite or mixed supply is important for businesses to comply with GST laws. The true tests for determining composite and mixed supply are based on the nature of the supplies and whether they are naturally bundled or not. By understanding these tests, businesses can ensure that they are properly classifying their supplies and paying the correct GST rates.
GST Rates and HSN Code for Calendars
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