Composite supply is a type of supply when two or more goods are sold together in a combination of each other. In Composite supply, goods are naturally bundled. The elements of composite supply depend on the ‘Principal Supply’.
Section 2(30) “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 or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. (http://www.cbic.gov.in/, 2019)
Section 2(90) “Principal Supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. (http://www.cbic.gov.in/, 2019)
(1) A travel ticket from Mumbai to Kolkata may include service of food being served on board, free insurance and use of airport lounge. In this case, the transportation of passengers is principal supply and other supplies are ancillary. The tax shall be calculated on the price of the ticket because the transportation of passengers is Principal Supply.
(2) When a consumer buys a refrigerator and also get a warranty and a maintenance contract with the laptop, this supply is a composite supply. Here the supply of refrigerator is a principal supply, warranty and maintenance are ancillary. Here tax shall be calculated on the price of a refrigerator.
(3) A 5-star hotel provides 3-days and 2-night packages with breakfast. This is a composite supply as the package of accommodation facilities and breakfast is also provided. In this case, hotel accommodation is the principal supply and breakfast is secondary to the hotel accommodation. Hotel accommodation attracts an 18% tax while breakfast attracts 28% tax. In this instant, Hotel accommodation is the principal supply and this supply will be taxed at 18%.
Section 2(74) of CGST Act 2017 “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 the price where such supply does not constitute a composite supply. (http://www.cbic.gov.in/, 2019)
- In Mixed Supply goods and services are sold separately.
- These are not naturally bundled.
A mixed supply consisting of two or more supplies shall be treated as the supply of that commodity which has the highest rate of tax.
(1) Diwali gift basket which consists of different items like sweets, chocolates, cakes, dry fruits packed in one pack is mixed supply as these items can be sold separately and it shall be treated as a supply of that specific item which attracts the highest rate of tax.
(2) A shopkeeper selling screen guard along with a mobile phone. Both mobile and screen guard can easily be priced and sold independently and are not naturally bundled. So such supply is called mixed supply. The Product which has the highest rate of tax will be applied to mixed supply.
http://www.cbic.gov.in/. (2019, 01 01). Central Board of Indirect Taxes & Customs. Retrieved from Central Board of Indirect Taxes & Customs: http://www.cbic.gov.in/resources//htdocs-cbec/gst/cgst-act.pdf;jsessionid=C72D302FDB4837699DC0F3F39813AF3C
Indirect Taxation Module, ICAI 2019