Section 2(30) of the CGST Act defines 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;
How to determine if it is a composite supply?
A supply of goods and/or services will be treated as composite supply if it fulfills the following criteria:
- Supply of 2 or more goods or services together; and
- It is naturally bundled, i.e., goods or services are usually provided together in the normal course of business.
What tax rate will apply?
The tax rate of the principal supply will apply on the entire supply.
Example: Goods are packed and transported with insurance. The supply of goods, packing materials, transport and insurance is a composite supply. Thus, the supply of goods is the principal supply. Tax liability will be the tax on the principal supply i.e., GST rate on the goods.
Section 2(74) of the CGST Act deals with 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;
Under GST, a mixed supply will have the tax rate of the item which has the highest rate of tax. For example- A Diwali gift box consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices supplied for a single price is a mixed supply. All are also sold separately. Since aerated drinks have the highest GST rate of 28%, aerated drinks will be treated as principal supply and 28% will apply on the entire gift box.