This is a new idea that came out of the GST. It will cover all supplies made at the same time, whether they are connected or not. You can have a “composite supply” or a “mixed supply” if you sell more than one good or service. Under the GST law, the idea of a “compound supply” is similar to the idea of “naturally bundled services” under the Service Tax Law. But the idea of a mixed source is completely new.

What is a supply under GST?

The word “supply” refers to all ways of getting things or services. It is made for a fee as part of a business transaction and includes the following:

• Sale
• Transfer
• Barter
• Exchange
• License
• Rental
• Lease
• Disposal
• Import of services for a consideration (if even it is not in the course or furtherance of business)

Why is the concept of mixed supply & composite supply important?

The GST Council has set rates for different types of items and services. In the GST Law, each type of good and service has its own GST rate. So it’s easy to figure out how much to charge for a certain good or service. But sometimes the sale of a good and the delivery of a service can be linked or can be done together even if they are not related. Take the case of a person who buys an air conditioner and also gets help installing it. The GST Act says how to rate this kind of service. So, it’s important to understand the ideas of combined supply and mixed supply. It helps figure out the right GST rate and makes sure that all of these kinds of sales are taxed the same way under GST.

What is a bundled supply?

A bundled supply is a group of things and/or services that are sold together. This idea was mostly used in service tax, where a “bundled service” meant that two or more services were sold together.

How to determine if it is naturally bundled, i.e., it cannot be separated?

In the normal course of business, the question of whether or not to bundle supplies relies on how the industry usually works. Here are a few ways to tell them apart:

• If most buyers expect these kinds of services to come as a package, the deal will be treated as if it were naturally bundled. For example, most business meetings want a hotel, an auditorium, and food all in one place.
• If most service providers in an industry offer a bundle of services, it can be said that the services are usually bundled. For example, most companies offer flights and food on board as a package. The kinds of services that make up a bundle will also help you figure out if the services are combined. If one service is the main one and the rest are just extras, it is called a “bundled service.” For example, most five-star hotels will do your laundry for free if you stay there. The main service is renting out the room. Laundry is a secondary service. Laundry services are only available to people who are staying at the hotel.

Other signs that services are being bundled in the normal process of business (but not a surefire way to spot it): Even if a customer buys less than the whole package, there is only one price. The parts are usually sold as a box. The different parts are not sold separately.

What is composite supply under GST?

Composite supply means that a supply includes two or more goods or services that are naturally bundled and sold together in the normal process of business. One of these goods or services is called the principal supply. It means that the things are most often sold together. You can’t get the things separately.

How to determine if it is a composite supply?

When the following conditions are met, a supply of things and/or services will be treated as a composite supply:

• Supply of 2 or more goods or services together; AND
• It is a natural bundle, i.e., goods or services are usually provided together in the normal course of business.
• They cannot be separated.

What tax rate will apply?

All of the supply will be taxed at the same rate as the main supply.

Example:Goods are insured while they are being packed and moved. A composite supplier includes goods, packing materials, transportation, and insurance. If there are no things to ship, insurance and shipping can’t be done separately. So, the main source is the supply of goods. The tax due is the tax on the main supplier, which is the GST rate on the goods. If the second condition isn’t met, the supply is called “mixed.”

What is mixed supply under GST?

• Under GST, a “mixed supply” is when two or more things or services are sold together for one price.
• Each of these things can be given on its own and doesn’t need the others.

Under GST, the tax rate for a mixed supply is the tax rate of the item with the higher tax rate. For example, a Diwali gift box with canned foods, sweets, candies, cakes, dry fruits, a carbonated drink, and fruit juices sold for one price is an example of a mixed supply. All of them are also sold on their own. Since the GST rate on carbonated drinks is the largest, at 28%, carbonated drinks will be treated as the main supply, and the 28% GST rate will be applied to the whole gift box.

How to determine if it is a mixed supply or a composite supply?

You must rule out the possibility that the supply is a composite source. If a supply is not also a hybrid supply, it can only be a mixed supply. If the items can be sold separately, meaning that they don’t come together naturally in the process of business, then it is a mixed supply. For example, a person does not have a mixed supply if they buy canned foods, sweets, candies, cakes, dry fruits, aerated drinks, and fruit juices separately and not in a Diwali gift box. Each item will have its own tax.

Differences between mixed and composite supplies

Particulars	Composite Supply	Mixed supply
Main item	Principal item	Item with highest tax rate
Tax rate applicable	Tax rate of principal item	Highest tax rate of all the items

Time of supply

Time of supply in case of composite supply

If the main supply is a service, like flying and getting food on board, the whole thing will be treated as a service supply. The rules about when services must be given will be in effect. In the same way, the supply of goods is the main source when it comes to buying and moving goods. The combined supply will be seen as a supply of goods, and the rules about when goods can be delivered will apply.

Time of supply in case of mixed supplies

If a service has the highest tax rate, the mixed supply will be treated as the supply of services. The rules about when services must be given would be in effect. In the same way, if the highest tax rate is on goods, then the mixed supply will be viewed as a supply of goods. The rules about when services must be given would be in effect. Please read our different articles to find out more about when things and services are delivered.

Some more examples

Example 1: Booking train tickets
You are buying a ticket for the Rajdhani train, which comes with a meal. It is a group of things. It is a combination of goods that can’t be sold separately. You can’t just buy the meal on the train and not the ticket. Because of this, the main source is the transportation of people. The tax rate that applies to the main service will be applied to the whole package. So, when you buy a Rajdhani ticket, IRCTC will charge you the 5% GST rate that applies to transporting people by train.

Example 2: Buy detergent Get bucket free
Many stores give away a bucket for free when you buy soap. This doesn’t meet the second condition, which is that it can’t be sold separately, so it’s a split supply. Either just a bucket or just soap can be bought. Then, the GST will be charged at the highest rate. Since 28% is the higher rate for detergents, this rate will be used for the whole mixed package.

Example 3: Works Contract
A works contract is a mix of providing a job and giving someone something. For example, when a new building is built, bricks, cement, sand, and the work of laborers, engineers, builders, etc. all come together to make a building (a good).

It is one of the best examples of a composite source. But to escape the confusion caused by the old tax law, the GST Act makes it clear that a works contract is a service that has to be taxed at a certain rate.

Example 4: Restaurant

The business of running a restaurant includes both making food and serving it. It’s also a great example of a standard composite supply. But to escape the confusion caused by the old tax law, the GST Act makes it clear that restaurants are a service and have specific tax rates.