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COMPOSITE AND MIXED SUPPLY

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What is a Composite Supply

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;

 Points to be noted:

  1. It is a supply where items are naturally bundled,
  2. These items are supplied in the ordinary course of business,
  3. In it one good or service is the main or principal supply.
  4. Naturally bundled does not mean it could not be supplied individually but as a general business practice it is being done.

For eg.

  1. Supply of breakfast with hotel room service by the hotel management. Room rent is inclusive of breakfast cost and price not changeable whether you take or deny breakfast.
  2. Supply of chains, buttons etc by the tailor along with his tailoring services.
  3. A 5 star hotel is booked for a conference of 100 delegates on a lump sum package with the variety of facilities such as: • Accommodation for the delegates • Breakfast for the delegates • Tea and coffee during conference • Access to fitness room for the delegates • Availability of conference room • Business centre

Tax Rate: Rate of tax in case of composite supply shall be tax rate as applicable on Principal Supply or item.

 

What is a Mixed Supply

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;

Tax Rate: Rate of tax in case of mixed supply shall be the highest tax rate which is applicable on any item in the mixed supply. If tax rate on any item is 28% then this tax rate shall be applicable on all items included in the mixed supply.

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