A
taxable event under GST is supply of goods or services or both. GST will be
payable on every supply of goods or services or both unless otherwise exempted.
The rates at which GST is payable for individual goods or services or both is
also separately notified Classification of supply (whether as goods or
services, the category of goods and services) is essential to charge applicable
rate of GST on the particular supply. The application of rates will pose no
problem if the supply is of individual goods or services, which is clearly
identifiable and the goods or services are subject to a particular rate of tax.
But not all supplies will be such simple and clearly identifiable supplies.
Some of the supplies will be a combination of goods or combination of services
or combination of goods and services both. Each individual component in a given
supply may attract different rate of tax. The rate of tax to be levied on such
supplies may pose a problem in respect of classification of such supplies. It
is for this reason, that the GST Law identifies composite supplies and mixed
supplies and provides certainty in respect of tax treatment under GST for such
supplies.
Composite Supply under
GST
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;
Illustration
— 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 principal supply;
A
works contract and restaurant services are classic examples of composite
supplies, however the GST Act identifies both as supply of services and
chargeable to specific rate of tax mentioned against such services (works
contract and restaurants).
In
respect of composite supplies (other than the two categories mentioned above),
the 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. Bundled service
means a bundle of provision of various services wherein an element of provision
of one service is combined with an element or elements of provision of any other
service or services.
Mixed Supply under GST
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.
Illustration
— A supply of a package consisting of canned foods, sweets, chocolates, cakes,
dry fruits, aerated drinks and fruit juices when supplied for a single price is
a mixed supply. Each of these items can be supplied separately and is not
dependent on any other. It shall not be a mixed supply if these items are
supplied separately;
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.
Time of supply in case
of composite supply
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.
Time of supply in case
of mixed supplies
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.
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