Introduction
Under the GST (Goods and Services Tax) system, goods and services are subject to taxation. However, when goods are supplied together, it can be challenging to determine the applicable tax rates. To address this issue, GST introduces composite and mixed supply concepts.
Composite Supply Under GST
Composite supply refers to the supply of two or more goods, services, or a combination of both, which are sold together as a bundled package in the normal course of business. It is considered as a component of the principal supply.
Example of composite supply
a) Supply of goods along with packaging, transportation costs, and delivery charges, where the goods are the principal supply.
b) In a gift box containing chocolates, the chocolates themselves are the principal supply, while the packaging, gift wrappers, and greeting cards are part of the composite supply.
Mixed Supply Under GST
Mixed supply occurs when a taxable person supplies two or more goods or services together for a single price.
Example of mixed supply
a) Selling a Deepavali gift box that includes sweets, toys, and crackers, all for a single price.
b) In a gift box containing various products, such as chocolates and fruits, if the GST rate for canned drinks is higher than the other goods in the box, the higher rate will be applicable to the entire gift box.
The Difference Between Composite and Mixed Supply:
a) Composite supply involves the supply of goods or services, with one of them being the principal supply, on which GST is applicable.
b) Mixed supply involves the supply of goods or services in combination, and the tax rate applicable is determined by the goods or services attracting the higher tax rate.
c) In composite supply, goods and services are naturally bundled together, while in mixed supply, they are not naturally bundled.
d) Composite supply considers the principal supply, whereas mixed supply does not.
e) supplies are not made separately in composite supply, whereas in mixed supply, they can be made separately.
f) The tax fixation in composite supply is based on the principal supply, whereas in mixed supply, it is based on the goods or services with higher tax rates.
g) Single price is not a significant factor in composite supply but a significant factor in mixed supply.
Conclusion
Understanding the concepts of composite and mixed supply is crucial within the GST framework. These concepts help differentiate the taxation on individual goods and services sold collectively. By clarifying the tax treatment in such scenarios, GST ensures a fair and transparent system for both businesses and consumers.
