Combined Supplies- Treatment under GST
0
0
In our daily life, we might often notice that two or more products or services are supplied in combination by suppliers, for example, a toothbrush provided free with Toothpaste or dry cleaning services provided free with accommodation services by Hotels.
In general trade, this combination of goods or services is provided by suppliers to expand their businesses, however, in GST, the components of this combined supply may have different GST rates. Therefore, to provide certainty to the combined supply, the concept of Composite or mixed supplies has been introduced in GST, and its treatment is defined under section 8 of CGST Act 2017.
But before we discussed the treatment of combined supplies, let’s first understand the two terms i.e. Composite supply and mixed supply.
Composite Supply: Composite supply has been defined under section 2(30) of CGST Act, 2017, where 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.
Treatment or Important points about Composite Supply (Section 8)
- Here, it is important to understand that to qualify as a composite supply, there should be two or more taxable supplies.
- Such Supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of business.
- Out of combined supply, one should be the principal supply
- If in a combined supply, one or more components is not a taxable supply, then it will not be a composite supply.
- For example, the Supply of books in coaching classes is a composite supply. This is being naturally bundled, and in the ordinary course of business, as Person providing coaching classes normally also supplied books as well. Here Principal supply is the supply of coaching services, hence GST rate applicable to coaching services would apply to entire combined services, even if the GST rate for the supply of books is different from the GST rate applicable to coaching services.
- Here, principal supply has been defined in section 2(90) of the CGST Act, where principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary
Mixed Supply: Mixed Supply has been defined under section 2(74) of CGST Act, 2017, where mixed supply means two or more individual supplies of goods or services, any combination thereof, made in conjunction, with each other by a taxable person for a single price where such supply doesn’t constitute a composite supply.
Treatment or Important points about Mixed Supply (Section 8)
- In Mixed supply, the two or more individual supplies of goods or services or both supplied in combination which is not naturally bundled, like Gift pack of Juices, biscuits, or soft drinks sold at a single price.
- If the supply is the combination of both taxable as well as non-taxable supplies, then such combination would be categorized as Mixed Supply.
- There should be a single price charged to the combination, however, in case the price of each component is separately identified, then such supply would not be classified as Mixed supply. In such a case, the GST rate applicable to each component would be applicable.
- In the case of Mixed Supply, the highest GST rate among different components would apply to the entire combination. For example, Hair oil- GST rate @18%, Sunscreen- GST Rate @28%, Hair comb- GST Rate @12% supplied together in a pack, and a single price is charged. In this case, the Highest GST rate i.e. 28% applies to the entire pack, even if the Hair oil and Hair comb GST rate are less than the GST rate of Sunscreen.
We hope you like our above article on Combines supplies and hopefully, you might have gained some knowledge about it.
Please feel free to share your thoughts, or any feedback, or in case you have any questions, please write us.
Taxation Insight
