In a Concept note issued recently, the Central Board of Excise and Customs (CBEC) has clarified all the ambiguities relating to Composite Supply and Mixed Supply under GST Regime.
Under GST, a composite supply would mean 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.
In respect of composite supplies, need to determine the supply as a composite one, will arise, so as to determine the appropriate classification. It will be necessary to determine as to whether a particular supply is naturally bundled in the ordinary course of business and what constitutes principal supply in such composite supplies.
The concept of composite supply under GST is identical to the concept of naturally bundled services prevailing in the existing service tax regime.
No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above, said the Concept note.
Under GST, a 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.
In order to identify if the particular supply is a mixed supply, the first requisite is to rule out that the supply is a composite supply. A supply can be a mixed supply only if it is not a composite supply. As a corollary it can be said that if the transaction consists of supplies not naturally bundled in the ordinary course of business then it would be a mixed supply. Once the amenability of the transaction as a composite supply is ruledout, it would be a mixed supply, classified in terms of supply of goods or services attracting highest rate of tax.
Determination of Tax liability of Composite and Mixed supplies
The tax liability on a composite or a mixed supply shall be determined in the following manner:
(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
(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
The Concept note also clarified that, If the composite supply involves supply of services as principal supply, such composite supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable. Alternatively, if composite supply involves supply of goods as principal supply, such composite supply would qualify as supply of goods and accordingly, the provisions relating to time of supply of goods would be applicable.
The mixed supply, involving supply of a service liable to tax at higher rates than any other constituent supplies, would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable. Alternatively, the mixed supply, involving supply of goods liable to tax at higher rates than any other constituent supplies, would qualify as supply of goods and accordingly the provisions relating to time of supply of services would be applicable.
Read the full text of the Concept Note below.
