Mixed Supply & Composite Supply Under GST: GST or Goods and Service Tax defines supply as any event of an exchange of goods or services that can be taxed under GST. GST can only be charged at the time of supply of goods and services.
Supply Under GST includes sale, transfer, exchange, barter, license, rental, lease, and disposal. A person is only liable to pay GST if he/she undertakes any of the transactions mentioned above during the ordinary course or furtherance of business. Thus, to calculate fair GST, a transaction must come under the definition of supply as per GST. Supply can be of two types according to GST, mixed supplies and composite supplies.
In this article, we will discuss types of supplies and the time of such supplies under GST.
What Are Mixed Supplies?
According to GST act, mixed supplies are those supplies which involve two or more individual supply of goods but are treated as one single supply. In simple words, A mixed supply is a supply of two or more independent items together. The items involved in a mixed supply do not affect the sale of each other, and both items can be sold separately. A supply that does not constitute a composite supply can be treated as a mixed supply.
To understand the definition better, let’s take an example, a grocery store makes a celebration package for Diwali, where the package consists of sweets, snacks, and fruit juices. All three items in the package can be sold separately and do not affect the other product’s sales. When these items are combined as a single unit, they can be termed as mixed supplies.
GST Rates In Case of Mixed Supplies
As per GST rules, the tax rate applicable for the mixed supplies will be that of the item that attracts the highest rate of GST. As in the above example, the GST rate would be the highest tax rate applicable on sweets, snacks, and fruit juices.
Time of Supply for Mixed Supplies
In mixed supplies, we know that the rate of the item that attracts the highest tax is applied. Hence, if the highest tax rate belongs to a supply under mixed supplies, it will be treated as a supply of services. In such a case, the provisions of time of supply of services will be applicable.
Similarly, suppose the highest tax rate belongs to an item of good. In that case, the supply will be treated as the supply of goods, and provisions relating to the time of supply of goods will be considered.
How To Determine Whether A Supply Is Mixed Or Not?
A supply can be termed a mixed supply only when the items involved in the supply can be sold separately and are not bundled up for sale in the normal course of business. It should also be kept in mind that each supply item under mixed supply does not influence the sale of other items involved therein.
What Are Composite Supplies?
GST defines composite supply as those supplies in which two or more items are bundled up together for sale during the ordinary course of business. The items involved in a composite supply are dependent on each other and cannot be sold separately. One of the items sold under a composite supply is the principal item. The items in a composite supply are sold in conjunction with each other as a business practice.
To understand the definition more easily, let’s take an example; when you buy a mobile phone, it comes with a box and warranty card, here the principal item is the mobile phone. The box and the warranty card cannot be sold separately without the phone, so the sale can be termed a composite supply.
GST Rates In Composite Supplies
As per the rules and regulations of GST, the tax rate applicable on the principal item under a composite supply will be the GST for the whole supply. In the above example, the principal item is the mobile phone, so the tax rate applicable on the mobile phone will be the tax rate of the whole supply.
Time of Supply for Composite Supply
Under GST, the taxable rate of a composite supply solely depends on the principal item of supply. If the principal item belongs to the service category, then the composite supply will be treated as a supply of services. In this case, the provisions of time of supply of services will be applicable.
Similarly, If the principal item of a composite supply belongs to goods. The supply will be treated as the supply of goods, and the provisions relating to the time of supply of goods will be applicable.
How To Determine If A Supply Is a Composite Supply
A supply of goods and services can be distinguished as a composite supply if it fulfills the following criteria:
- The supply involves two or more goods or services bundled up together.
- The supply is a natural bundle and is sold usually in the furtherance of business.
- The items involved in the supply cannot be sold separately.
- One of the items involved should be a principal item.
Examples of Composite And Mixed Supplies
Let’s discuss some more examples of mixed and composite supplies to understand the topic better.
Example A: Booking a train Ticket
While we book a train ticket, it includes a meal. The two commodities are bundled up for sale. It can be treated as a composite supply as one commodity cannot be sold without the other. Here, the principal item is the train ticket, which is a service, so the supply will be treated as a supply of service, and GST will be charged accordingly.
Example B: Free products with commodities
Most of the time, retailers provide offers with products, for example, bucket free with detergent. Here the products are bundled up for sale, but each product can be sold individually. So, it is a mixed supply. Here, the highest tax rate will apply to the whole supply.