Supply Under GST – CA Inter Tax Question Bank

Supply Under GST – CA Inter Tax Question Bank is designed strictly as per the latest syllabus and exam pattern.

Supply Under GST – CA Inter Tax Question Bank

Question 1.
Explain the meaning of the term “Recipient of supply of goods and/or services” under the CGST Act, 2017. (May 2018, 5 marks)
Answer:
As per Section 2(93) of the Central Goods and Services Tax (CGST) Act, 2017, unless the context otherwise requires, the term “recipient” of supply of goods or services or both, means:

(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and

(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.

Question 2.
Explain the meaning of supply as per provisions of Section 7(1) of Central Goods and Service Tax Act, 2017. (Nov 2018, 5 marks)
Answer:
As per section 7(1) of CGST Act, 2017, the term supply includes –
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person, in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and

Supply Under GST – CA Inter Tax Question Bank

Question 3.
With reference to provisions of CGST Act, 2017 discuss in brief, when “Importation of services” to be considered as supply and when it is not to be considered as supply. (Nov 2020, 5 marks)

Question 4.
How to distinguish whether a particular supply involves supply of goods or services or both?
Answer:
The Schedule II appended to CGST Act, 2017 enlists the activities which are to be treated as supply of goods or supply of services. One may refer Schedule II with reference to Section 7 to classify whether the transaction involves supply of goods or supply of services.

Question 5.
Whether supply of goods or services without consideration is liable to tax?
Answer:
The activities enumerated in Schedule I will qualify as supply even if made without consideration. Accordingly, such supplies in the absence of consideration are liable to tax. To illustrate, following are the activities which will qualify as supply in the absence of consideration and eventually would be liable to tax:

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods —
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Question 6.
Whether transfer of goods to another branch located outside the State is taxable?
Answer:
In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of clause 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that, supply of goods to a branch / unit located within the same State having separate registration would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).

Question 7.
Whether gifts given by employer to employee will also qualify as supply?
Answer:
In terms of Explanation appended to Section 15 it is clarified that employer and employee will be deemed to be related persons. Accordingly, in terms of proviso to clause 2 of Schedule I, gift by an employer to employee will be a supply and will be liable to tax. However, any gifts for a value not exceeding fifty thousand rupees in a financial year will not qualify as supply and as such will not be liable to tax.

Supply Under GST – CA Inter Tax Question Bank

Question 8.
Whether supply of goods by principal to his agent or by agent to his principal is taxable in the absence of consideration?
Answer:
In terms of Section 7 read with Schedule I, following would qualify as supply:

  1. Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
  2. Supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

Question 9.
What is composite supply?
Answer:
In terms of Section 2(30) of CGST Act, 2017 composite supply means supply 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. The illustration of composite supply appended to Section 2(30) is as follows:

Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a composite supply.

Multiple Choice Question

Question 1.
What are different types of supplies covered under the scope of supply?
(a) Supplies made with consideration
(b) Supplies made without consideration
(c) Both of the above
(d) None of the above
Answer:
(c) Both of the above

Question 2.
What are the factors differentiating composite supply and mixed supply?
(a) Nature of bundling i.e. artificial or natural
(b) Existence of principal supply
(c) Both of the above
(d) None of the above
Answer:
(c) Both of the above

Supply Under GST – CA Inter Tax Question Bank

Question 3.
What would be the tax rate applicable in case of mixed supply?
(a) Tax rate as applicable on supply attracting the lowest rate of tax
(b) Tax rate as applicable on supply attracting the highest rate of tax,
(c) Tax @ 28%
(d) None of the above
Answer:
(b) Tax rate as applicable on supply attracting the highest rate of tax,

Question 4.
What would be the tax rate applicable in case of composite supply?
(a) Tax rate as applicable on principal supply
(b) Tax rate as applicable on ancillary supply
(c) Tax rate as applicable on respective supply
(d) None of the above
Answer:
(a) Tax rate as applicable on principal supply

Question 5.
____ of the Constitution provides that no tax shall be levied or collected except by authority of law?
(a) Article 254
(b) Article 245
(c) Article 265
(d) Article 256
Answer:
(c) Article 265

Question 6.
What are the taxes levied on an intra-State supply?
(a) CGST
(b) SGST
(c) CGST and SGST
(d) IGST
Answer:
(c) CGST and SGST

Question 7.
Which of the following taxes will be levied on imports?
(a) CGST
(b) SGST
(c) IGST
(d) CGST and SGST
Answer:
(c) IGST

Question 8.
What is the maximum rate prescribed under UTGST Act?
(a) 14%
(b) 28%
(c) 20%
(d) 30%
Answer:
(c) 20%

Supply Under GST Notes

Taxable Event – Supply

The incidence of tax is the foundation stone of any taxation system. It determines the point at which tax would be levied, i.e. the taxable event. The existing framework of taxable event in various statutes is prone to catena of interpretations resulting in litigation since decades.

Broadly, the controversies relates to issues like whether a particular process amounts to manufacture or not, whether the sale is pre-determined sale, whether a particular transaction is a sale of goods or rendering of services etc. The GST laws seek to resolve these issues by laying down one comprehensive taxable event i.e: “Supply”.

Meaning and scope of supply [Sec. 7]

Heading
Provisions and Analysis

General meaning [Sec. 7(1)(a)]
Supply includes:
All forms of supply of goods and/or services such as

  • sale,
  • transfer,
  • barter,
  • exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in course of or furtherance of business.

Analysis:
Supply without consideration is not taxable except supply u/s 7(1)(c) read with schedule I.

Question:
Will giving away essential commodities by a charitable institution be taxable activity?
Answer:
In order to be a supply which is taxable under GST, the transaction should be in the course or furtherance of business. As there is no quid pro quo involved ¡n supply for charitable activities, it is not a supply under GST.

Import of services [Sec. 7(l)(b)]
Import of services for a consideration whether or not in the course or furtherance of business and (inserted w.e.f. 01.02.2019 by CGST Amendment Act 2018);

Analysis:

  • Import of goods is dealt separately under the Customs Act, 1962, wherein.IGST shall be levied as additional duty of customs in addition to basic customs duty under the Customs Tariff Act, 1975.
  • Persons importing services for personal purposes shall also be liable to GST on reverse charge basis.
  • It should be noted that there is no threshold limit in reverse charge. Example: Katrina Kaif has taken beauty parlour service from USA, she is liable to pay Tax under reverse charge mechanism.

Supply without consideration [Sec. 7(1)(c)]
The activities specified in Schedule I, made or agreed to be made without a consideration
Note: Valuation will be done as per GST valuation rules

Certain activities or transactions constitute a supply [Section 7(1A)] Inserted by CGST Amendment Act, 2018
“Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II”

Not Supply of goods or services [Sec. 7(2)]
Not withstanding anything contained in sub-section (1):

(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

Issue of Notification by Government [Sec. 7(3)]
Subject to the provisions of sub-sections (1), (1A)[lnserted by CGST Amendment Act 2018] and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.

Supply Under GST – CA Inter Tax Question Bank

Schedule I
Activities to be treated as supply even if made without consideration

Title Provision Analysis
1. Permanent transfer or disposal of business assets Permanent transfer or disposal of business assets where input tax credit has been availed on such assets. 1. It may be noted that this provision would apply only if input tax credit has been availed on such assets.
2. As per Section 17(5) certain goods are not eligible for input tax credit e.g motor vehicle, would not treated as supply. -3. This is applicable to business assets only hence service provided without consideration would not attract GST.
Example 1:
Free coaching service provided by Mr. Ram Kishan would not attract GST.
Example 2:
Distribution of assets by partnership firm to its partner would amount to supply.
Goods transfer to related or distinct person • Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or further­ance of business:

• Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

As per section 25,

1. A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.

2. Definition of related person is given in section 15 and employee is covered in the definition.

3. The amount paid by employer to employee in lieu of services rendered by the employee and which is mentioned in the offer letter or agreement is exempted from the levy of tax.

4. Moreover, certain supplies are not agreed upon formally, say Diwali gills, gift on organisation achieving targets, or gifts given casually will be taxable provided value of gifts exceeds ₹ 50,000.

5. Gifts upto ₹ 50,000 to employees may be exempted. However, reversal of Input tax credit will be required.

6. Stock transfer between the related person or distinct person in same organisation is subject to GST.

Principal to agent or vice versa supply Supply of goods—

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

Clearance of goods to a consignment agent / clearing agent and forwarding agent, even if such agents are located in the same State would attract GST.
Import of Service from related person Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business. However, Import of goods are subject to custom duty.
Example:
XYZ Ltd. incorporated a Company named ABC in UK.
XYZ Ltd. import service from ABC company,
It will be treated as supply of service from related person and would attract GST.

Donations received by charitable Institutions from Individual donors, without quid pro quo
An important feature of consideration is quid pro quo (something for something). Donations received by the charitable organisations are treated as consideration only if there exists, quid pro quo, i.e., there is an obligation on part of recipient of the donation or gift to do anything (supply a service).

Generally, institutions such as religious institutions, charitable organisations, schools, hospitals, orphanages, old age homes etc. receive financial help or any other support in the form of donation or gift from the individual donors.

In order to express the gratitude towards such help/support, the recipient institutions place a name plate or similar such acknowledgment in their premises.

When the name of the donor is displayed in recipient institution’s premises, in such a manner, which can be said to be an expression of gratitude and public recognition of donor’s act of philanthropy and is not aimed at giving publicity to the donor in such manner that it would be an advertising or promotion of his business, then it can be said that there is no supply of service for a consideration (in the form of donation).

In other words, there is no obligation (quid pro quo) on part of recipient of the donation or gift to do anything (supply a service). Therefore, there is no GST liability on such consideration.

Schedule II

Activities to be treated as supply of goods or supply of services

Provision Whether goods or service Analysis
1(a) Any transfer of the title in goods Supply of goods Example:
When the goods are stolen, title of goods shall pass to insurance company. It is treated as supply.
1(b) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof Supply of Service Transfer of right to use goods Without transfer of title is supply of service.
1(c) Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration Supply of goods Example:
Financial lease/Hire purchase tran­saction would amount to supply of goods under the GST.
2(a) Any’ lease, tenancy, easement, license to occupy land Supply of Service Example:
Land used for circus, entertain­ment and parking purposes;
2(b) Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly Supply of Service Leasing of building for commercial purpose shall amount to supply of service.
3. Any treatment or process which is applied to another person’s goods Supply of Service Example:
Job work shall be treated as supply of service.
4(a) Transfer of business assets
Disposed of business assets,
Supply of goods
4(b) Change of use of goods: From business to personal use, Supply of Service Example:
A computer, company car, when put to non-business use is covered.
4(c) Where any person ceases to be a taxable person, any goods forming part of the assets of any business unless:

(a) the business is transferred as a going concern to another person; or
(b) the business is carried on by a personal represen­tative who is deemed to be a taxable person.

Supply of goods In other words, when running business is transfer to representative, it shall not amount to supply of goods.
5(a) Renting of immovable property Supply of Service
5(b) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occu­pation, whichever is earlier. Supply of Service No refund of unutilised input tax credit shall be allowed under sub-section (3) of section 54 of the said Central Goods and Services Tax Act, in case of supply of services specified in sub-item (b) of item 5 of Schedule II of the Central Goods and Services Tax Act. [Notification No. 15/2017-Central Tax (Rate)]
5(c) Temporary transfer or permitting the use or enjoyment of any intellectual property right Supply of Service Example:
Permitting the use of patent, copyright, trademark shall amount to service.
5(d) Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software Supply of Service Example:
Software would amount to supply of service.
5(e) Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; Supply of Service Example:
Mr. Ram request to Mr. Shyam not to teach a particular subject in particular area for 5 years. Shyam agree with the terms and condition against a consideration of ₹ 5,00,000.
The same would amount to supply of service by Shyam and would attract GST.
5(f) Transfer of the right to use any goods for any purpose Supply of Service Renting of goods i.e movable property shall amount to supply of service.
Example:Renting of coffee machine, generator etc.
6. The following compo­site supplies shall be treated as a supply of services, namely:

(a) works contract as defined in clause (119) of Section 2; and
(b) supply, by way of or as part of, or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consum­ption), where such supply or service is for cash, deferred payment or other valuable con­sideration.

Supply of Service Example:
Both, pure labour contracts and works contracts involving transfer of property are service under the GST law. Example:
Restaurant and outdoor catering are service under GST law.
7. Supply of goods by any unincorporated association or body of persons to a member thereof Supply of goods

Schedule III

Activities or transactions which shall be treated neither as a supply of goods nor a supply of services

Provision Analysis with examples
1. Services by an employee to the employer in the course of or in relation to his employment. Gift exceeding ₹ 50,000 given by employer to employee, not mention in employment term, shall be taxable as per Schedule I
2. Services by any court or Tribunal established under any law for the time being in force.
3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;

(b) the duties performed by any person who holds any post in pursuance of the provi­sions of the Constitution in that capacity; or

(c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

Example:
Judge of Supreme Court of India is a constitutional post, remuneration received by them shall not subject to GST.Example:
CBDT is body established by CG. Chairman / Member / Director (who are not employees) of these body shall be out of GST,
4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased. Thanks to almighty, there is no tax after death.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule 11, sale of building. It is subject to stamp duty.
6. Actionable claims, other than lottery, betting and gambling.’ Actionable claim [Sec. 2(1)] shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882. Lottery, betting and gambling are subject to GST.
7. Supply of goods from a place in the non-taxable territory to another place in the nontaxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption;

(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption

Explanation 1: For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court.

Explanation 2: For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962

A. Non-supplies clarified by way of clarification CBIC has clarified that following three activities/transactions are non- supplies:

(i) Grant of alcoholic liquor licence: Services by way of grant of alcoholic liquor licence by the State Governments are treated neither as a supply of goods nor a supply of service. Such licence is granted against consideration in the form of licence fee or application fee or by whatever name it is called.

This special dispensation is applicable only to supply of service by way of grant of liquor licenses by the State Governments as an agreement between the Centre and States. Hence, this is not applicable/has no precedence value in relation to grant of other licenses and privileges for a fee in other situations, where GST is payable.
It may be noted that services provided by the Government to business entities including by way of grant of privileges, licences, mining rights, natural resources such as spectrum etc. against payment of consideration in the form of fee, royalty etc. are taxable under GST. Tax is required to be paid by the business entities on such services under reverse charge.

Some important Case Laws

Case law 1: Principal Agent Relationship:
In order to determine whether a particular principal-agent relationship falls within the ambit of the Para 3. of Schedule I as discussed above or not, the deciding factor is whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not? In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.

Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of Para 3. above. However, it may be noted that in cases where the invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Para 3. above. Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by Para 3. above [Circular No. 57/31/2018 GST dated 04.09.2018].

Clarification:
CBIC has clarified Taxability of tenancy rights/pagadi under GST as under:

Pagadi system, i.e. transfer of tenancy rights against tenancy premium, is prevalent in some States. The activity of transfer of tenancy right against consideration [i.e. tenancy premium] is squarely covered under supply of service liable to GST. It is a form of lease or renting of property and such activity is specifically declared to be a service in Para 2. of Schedule II as discussed in table above i.e. any lease, tenancy, easement, licence to occupy land is a supply of services.

Although stamp duty and registration charges have been levied on such transfer of tenancy rights, it shall be still subject to GST since merely because a transaction/supply involves execution of documents which may require registration and payment of registration fee and stamp duty, would not preclude them from the ‘scope of supply’ and from payment of GST. The transfer of tenancy rights cannot be treated as sale of land/ building in para 5. of Schedule III. Thus, it is not a negative list activity [this concept is discussed under next heading] and consequently, a consideration for the said activity shall attract levy of GST.

To sum up, transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable. Further, services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST [Circular No.44/18/2018 CGST dated 02.05.2018].

It is important to note that grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt from tax [Entry 12 of Notification No. 12/2017 CT (R) dated 28.06.2017 – Discussed in Chapter 4 – Exemptions from GST].

Further, CBIC has clarified that following activities/transactions are neither supply of goods nor supply of services.

(i) Inter-State movement of various modes of conveyance
Inter-State movement of various modes of Conveyance, between distinct persons as specified in section 25(4) of the CGST Act, [explained earlier in this chapter] including-

  • Trains,
  • Buses,
  • Trucks,
  • Tankers,
  • Trailers,
  • Vessels,
  • Containers,
  • Aircrafts,

(a) carrying goods or passengers or both; or
(b) for repairs and maintenance, [except in cases where such movement is for further supply of the same conveyance] was discussed in GST Council’s meeting held on 11th June, 2017 and the Council recommended that such inter-State movement shall be treated ‘neither as a supply of goods or supply of service’ and therefore not be leviable to IGST.

Thus, above activity may not be treated as supply and consequently IGST will not be payable on such supply. However, applicable CGST/SGST/IGST, as the case may be, shall be leviable on repairs ‘ and maintenance done for such conveyance [Circular No. 1/1/2017 IGST dated 07.07.2017**].

(i) Inter.-State movement of rigs, tools and spares, and all goods on wheels [like cranes]
**Above circular shall mutatis mutandis apply to inter-State movement of rigs, tools and spares, and all goods on wheels [like cranes], [except in cases where movement of such goods is for further supply of the same goods], such inter-State movement shall be treated ‘neither as a supply of goods or supply of service,’ and consequently no IGST would be applicable on such movements. In this context, it is also reiterated that applicable CGST/SGST/IGST, as the case maybe, is leviable on repairs and maintenance done for such goods [Circular No. 21/21/2017-GST dated 22.11.2017],

Meaning and taxability of composite and mixed supply [Sec. 8]

Meaning of composite supply [Sec. 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;
Analysis:
This means that the goods and services are bundled owing to natural necessities.

Examples
1. When a consumer buys a television set and he also gets warranty and a maintenance contract with the TV, this supply is a composite supply. In this example, supply of TV is the principal supply, warranty and maintenance service are ancillary.
2. Package of accommodation facilities and breakfast.

Meaning of mixed supply [sec. 2(74)]
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.

Supply Under GST – CA Inter Tax Question Bank

Analysis:
The combination of goods and/or services is not bundled due to natural necessities, and they can be supplied individually in the ordinary course of business.
Illustration:
A shopkeeper selling storage water bottles along with refrigerator. Bottles and the refrigerator can easily be priced and sold separately.

Tax liability on a composite supply [sec. 8(a)]
A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;
Example:
Suppose a dealer sells Laptop along with bags. The rate of GST on Laptop and bag are different. Since the Laptop is a principal supply, the rate of Laptop shall be applicable on such composite supply.

Tax liability on a mixed supply [Sec. 8(b)]
A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Example:
M/s Cad burry sold gift packets of chocolate and fresh Juices. The GST rate of chocolate is 18% & fresh juice liable to GST at 12%. This is the example of mixed supply & is liable to GST at 18% (higher of 12% or 18% applicable).

Guiding principles for determining whether a supply is a composite supply or mixed supply:
While there are no infallible tests for such determination, the following guiding principles could be adopted to determine as to whether it is a composite supply or a mixed supply. However, every supply should be independently analysed.

Description Composite Supply Mixed Supply
Naturally bundled Yes No
Supplied together Yes Yes
Can be supplied separately No Yes
One is predominant supply for recipient Yes No
Other supply is not ‘aim in itself of recipient Yes No
Each supply priced separately No No
All supplies are goods Yes Yes
All supplies are services Yes Yes
One supply is goods and other supply is services Yes Yes

Circular
For instance, in case of servicing of cars involving supply of both goods (spare parts) and services (labour) where the value of goods and services are shown separately, CBIC has clarified that the goods and services would be liable to tax at the rates as applicable to such goods and services separately [Circular No. 47/21/2018 GST dated 08.06.2018].

Composite and mixed supply case laws
Further, given below is the illustrative list determining what constitutes the principal supply in the given composite supplies:

Activity/ transaction Principal supply
Supply of printed books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc., printed with design, logo, name, address or other contents supplied by the recipient of such printed goods In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service.

In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. by the printer using its physical inputs including paper to print the design, logo etc. supplied by the recipient of goods, predominant supply is supply of goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods. [Circular No. 11/11/2017 GST dated 20.10.2017]

Activity of bus body building The principal supply may be determined on the basis of facts and circumstances of each case [Circular No. 34/8/2018-GST dated 01.03.2018].
Retreading of tyres Pre-dominant element is process of retreading which is a supply of service. Rubber used for retreading is an ancillary supply.
Supply of retreaded tyres, where the old tyres belong to the supplier of retreaded tyres, is a supply of goods [Circular No. 34/8/2018-GST dated 01.03.2018].

Leave a Comment

Your email address will not be published. Required fields are marked *