Mixed Supply and Composite Supply under GST
Impact of GST on Manufacturers and FMCG Industry
February 28, 2025
4.Registering under GST
February 28, 2025
Mixed Supply and Composite Supply under GST
The Goods and Services Tax (GST) framework introduces the concepts of Mixed Supply and Composite Supply to determine the appropriate tax treatment for bundled goods or services. These provisions help classify transactions correctly and apply the right tax rate.
1. Composite Supply (Section 2(30) of CGST Act, 2017)
Definition
A Composite Supply is a naturally bundled supply of two or more goods or services, where:
- They are supplied together in the normal course of business.
- One item is the principal supply, while the others are ancillary to it.
- The entire supply is taxed at the rate applicable to the principal supply.
Example of Composite Supply:
📌 Example 1: Air Travel with Meals
- When an airline offers flight tickets with onboard meals, it is considered a composite supply.
- The principal supply is air travel, so the GST rate applicable to air travel will apply to the whole package.
📌 Example 2: Sale of Laptop with Warranty and Accessories
- A laptop sold with a charger, warranty, and software installation is a composite supply.
- The laptop is the principal supply, and the entire transaction is taxed at the laptop’s GST rate.
2. Mixed Supply (Section 2(74) of CGST Act, 2017)
Definition
A Mixed Supply is a supply of two or more independent goods or services, supplied together without being naturally bundled, and can be supplied separately.
🔹 In this case, the highest GST rate among the individual items applies to the entire supply.
Example of Mixed Supply:
📌 Example 1: Gift Hampers with Chocolates and Soft Drinks
- A shop sells a gift hamper containing chocolates (18%) and aerated soft drinks (28%).
- Since these items are not naturally bundled, it is a mixed supply, and the GST rate of 28% (highest rate) applies to the entire package.
📌 Example 2: Hotel Stay with Spa Service
- A hotel offers a room stay (18%) and an optional spa service (12%) as a package.
- If the customer is free to choose or exclude the spa, it becomes a mixed supply, and the higher GST rate (18%) will apply.
3. Key Differences Between Composite and Mixed Supply
| Basis | Composite Supply | Mixed Supply |
|---|---|---|
| Bundling Nature | Naturally bundled and supplied together | Not naturally bundled but supplied together |
| Principal Supply | Has a dominant principal supply | No principal supply; all items are independent |
| Tax Rate Applicability | GST rate of the principal supply applies | GST rate of the highest taxed item applies |
| Example | Hotel stay with breakfast | Gift hamper with chocolates and soft drinks |
4. GST Implications of Composite and Mixed Supply
✅ For Composite Supply: Taxed at the GST rate of the principal supply.
✅ For Mixed Supply: Taxed at the highest GST rate among the supplied items.
🔹 Proper classification is essential to avoid GST compliance issues and overpayment of tax.
5. Conclusion
Understanding the distinction between Composite Supply and Mixed Supply helps businesses correctly apply GST rates and comply with tax laws. Incorrect classification can lead to higher tax liabilities and penalties. Businesses should carefully analyze their bundled offerings to determine whether they are composite or mixed supplies to optimize tax treatment.
