Composite Supply and Mixed Supply (Section 8 of CGST Act, 2017)
INTRODUCTION:-
GST law provide two event i.e. Taxable event & Charging Event, Taxable event in GST is supply of goods or service or both whereas Charging event in GST is time of supply i.e At what time GST liability is to be paid. GST will be payable on every supply of goods or services or both unless otherwise exempted. GST law specified different type of GST rates for different type of goods & Service & taxable person has to discharged the GST liability as per rates provided for each goods & service. 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. Difficulty in such a case is to application of GST rates for such type of combined supply. Hence the concept of Composite supply & Mixed supply comes in to the picture in GST law.
COMPOSITE SUPPLY UNDER GST:-
(A) Definition of Composite Supply:- As per the Section 2(30) of CGST Act, 2017 “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.
Definition of Principal Supply:- As per the Section 2(90) of CGST Act, 2017 “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.
Understanding from above mentioned definition is that the supply is Composite Supply only if all the following conditions are satisfied.
1) Supply should be conjunction with each other i.e. Supply of two or more goods or services or both together.
2) It is a natural bundle, i.e., goods or services are usually provided together in the normal course of business.
3) They cannot be separated.
From the above mentioned conditions the focus is to be made on Naturally bundled supply, Because of whether supply is composite supply or not is mainly depends up on the if it is naturally bundled or not, And there is not a straight jacket formula in GST law which provides that particular supply is composite one. It is depend up on the nature of transactions of each business which constitute supply is composite or not. once it is found that the supply is composite supply & what constitute the principal supply then it is not difficult to find classification of supply & rate of supply.
(B) Rate of tax for Composite Supply:- 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, Hence Rate of Principal supply will apply on entire supply.
(C) Time of supply in case of Composite supply:-
1) 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.
As per the Section 13 of CGST Act, 2017 Time of supply of services,
(a) If the invoice is issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of issue of invoice by the supplier.
ii) Date of receipt of payment.
(b) If the invoice is not issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of provision of service.
ii) Date of receipt of payment.
2) 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.
As per the Section 12 of CGST Act, 2017 Time of supply of goods shall be,
(a) Date of issue of invoice by the supplier. If invoice is not issued, then the last date on which supplier is legally bound to issue the invoice with respect to the supply.
(D) Following are the indicative, but not determinative, of bundling of supply in ordinary course of business:-
1) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use.
2) The elements are normally advertised as a package.
3) The different elements are not available separately.
4) The different elements are integral to one overall supply – if one or more is removed, the nature of the supply would be affected.
(E) Illustrations:-
1) 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.
2) A hotel provides a 4-D/3-N package with the facility of breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of providing hotel accommodation.
3) A 5 star hotel is booked for a conference of 100 delegates on a lump sum package with the following facilities,
• 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
MIXED SUPPLY UNDER GST:-
(A) Definition:- As per the Section 2(74) of CGST Act, 2017 “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.
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 confirmation of the transaction as a composite supply is ruled out, it would be a mixed supply, classified in terms of a supply of goods or services attracting highest rate of tax.
(B) Rate of tax for Mixed Supply:- 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. Hence highest rate among the individual elements in such supply will apply on entire supply.
(C) Time of supply in case of Mixed supply:-
1) The mixed supply, if involves supply of a service liable to tax at higher rates than any other constituent supplies, such mixed supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable.
As per the Section 13 of CGST Act, 2017 Time of supply of services,
(a) If the invoice is issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of issue of invoice by the supplier.
ii) Date of receipt of payment.
(b) If the invoice is not issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of provision of service.
ii) Date of receipt of payment.
2) The mixed supply, if involves supply of goods liable to tax at higher rates than any other constituent supplies, such mixed supply would qualify as supply of goods and accordingly the provisions relating to time of supply of goods would be applicable.
As per the Section 12 of CGST Act, 2017 Time of supply of goods shall be,
(a) Date of issue of invoice by the supplier. If invoice is not issued, then the last date on which supplier is legally bound to issue the invoice with respect to the supply.
(D) Illustrations:-
1) 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.
2) A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.
Clarification on taxability of printing contracts (Circular No.11/11/2017 Dt. 20.10.2017):-
1) The printing industry in India in particular faces a dilemma in determining whether the nature of supply provided is that of goods or services and whether in case certain contracts involve both supply of goods and services, whether the same would constitute a supply of goods or services or if it would be a composite supply and in case it is, then what would constitute the principal supply. It is to be noted that in case of composite supplies, taxability is determined by the principal supply. To address concerns of the printing industry, CBEC has come out with Circular no.11/11/2017-GST dated 20.10.2017.
2) It is clarified that supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc. printed with logo, design, name, address or other contents supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on thebasis of what constitutes the principal supply.
3) In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.
4) In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of
goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff.
GST law provide two event i.e. Taxable event & Charging Event, Taxable event in GST is supply of goods or service or both whereas Charging event in GST is time of supply i.e At what time GST liability is to be paid. GST will be payable on every supply of goods or services or both unless otherwise exempted. GST law specified different type of GST rates for different type of goods & Service & taxable person has to discharged the GST liability as per rates provided for each goods & service. 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. Difficulty in such a case is to application of GST rates for such type of combined supply. Hence the concept of Composite supply & Mixed supply comes in to the picture in GST law.
COMPOSITE SUPPLY UNDER GST:-
(A) Definition of Composite Supply:- As per the Section 2(30) of CGST Act, 2017 “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.
Definition of Principal Supply:- As per the Section 2(90) of CGST Act, 2017 “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.
Understanding from above mentioned definition is that the supply is Composite Supply only if all the following conditions are satisfied.
1) Supply should be conjunction with each other i.e. Supply of two or more goods or services or both together.
2) It is a natural bundle, i.e., goods or services are usually provided together in the normal course of business.
3) They cannot be separated.
From the above mentioned conditions the focus is to be made on Naturally bundled supply, Because of whether supply is composite supply or not is mainly depends up on the if it is naturally bundled or not, And there is not a straight jacket formula in GST law which provides that particular supply is composite one. It is depend up on the nature of transactions of each business which constitute supply is composite or not. once it is found that the supply is composite supply & what constitute the principal supply then it is not difficult to find classification of supply & rate of supply.
(B) Rate of tax for Composite Supply:- 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, Hence Rate of Principal supply will apply on entire supply.
(C) Time of supply in case of Composite supply:-
1) 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.
As per the Section 13 of CGST Act, 2017 Time of supply of services,
(a) If the invoice is issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of issue of invoice by the supplier.
ii) Date of receipt of payment.
(b) If the invoice is not issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of provision of service.
ii) Date of receipt of payment.
2) 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.
As per the Section 12 of CGST Act, 2017 Time of supply of goods shall be,
(a) Date of issue of invoice by the supplier. If invoice is not issued, then the last date on which supplier is legally bound to issue the invoice with respect to the supply.
(D) Following are the indicative, but not determinative, of bundling of supply in ordinary course of business:-
1) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use.
2) The elements are normally advertised as a package.
3) The different elements are not available separately.
4) The different elements are integral to one overall supply – if one or more is removed, the nature of the supply would be affected.
(E) Illustrations:-
1) 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.
2) A hotel provides a 4-D/3-N package with the facility of breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of providing hotel accommodation.
3) A 5 star hotel is booked for a conference of 100 delegates on a lump sum package with the following facilities,
• 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
MIXED SUPPLY UNDER GST:-
(A) Definition:- As per the Section 2(74) of CGST Act, 2017 “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.
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 confirmation of the transaction as a composite supply is ruled out, it would be a mixed supply, classified in terms of a supply of goods or services attracting highest rate of tax.
(B) Rate of tax for Mixed Supply:- 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. Hence highest rate among the individual elements in such supply will apply on entire supply.
(C) Time of supply in case of Mixed supply:-
1) The mixed supply, if involves supply of a service liable to tax at higher rates than any other constituent supplies, such mixed supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable.
As per the Section 13 of CGST Act, 2017 Time of supply of services,
(a) If the invoice is issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of issue of invoice by the supplier.
ii) Date of receipt of payment.
(b) If the invoice is not issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then earliest of the following dates,
i) Date of provision of service.
ii) Date of receipt of payment.
2) The mixed supply, if involves supply of goods liable to tax at higher rates than any other constituent supplies, such mixed supply would qualify as supply of goods and accordingly the provisions relating to time of supply of goods would be applicable.
As per the Section 12 of CGST Act, 2017 Time of supply of goods shall be,
(a) Date of issue of invoice by the supplier. If invoice is not issued, then the last date on which supplier is legally bound to issue the invoice with respect to the supply.
(D) Illustrations:-
1) 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.
2) A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.
Clarification on taxability of printing contracts (Circular No.11/11/2017 Dt. 20.10.2017):-
1) The printing industry in India in particular faces a dilemma in determining whether the nature of supply provided is that of goods or services and whether in case certain contracts involve both supply of goods and services, whether the same would constitute a supply of goods or services or if it would be a composite supply and in case it is, then what would constitute the principal supply. It is to be noted that in case of composite supplies, taxability is determined by the principal supply. To address concerns of the printing industry, CBEC has come out with Circular no.11/11/2017-GST dated 20.10.2017.
2) It is clarified that supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc. printed with logo, design, name, address or other contents supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on thebasis of what constitutes the principal supply.
3) In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.
4) In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of
goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff.
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