The taxable event under GST is “supply” of goods or services or both. GST is leviable on every supply of goods or services or both unless otherwise exempted. The applicable rates for goods and services have been notified by the Government. There is no ambiguity for charging particular rate of tax, if the supply of individual goods or services is clearly determined.

However, not all supplies are clearly identifiable supplies, be it supply of goods or services, some of the supplies are 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. The rate of tax to be levied on such supplies causes a problem in respect of classification of such supplies. Therefore, the GST Law provides the concept of composite supplies and mixed supplies and tax treatment thereof.

Composite Supply

The concept of composite supply under GST is identical to the concept of naturally bundled services under the service tax regime (i.e., pre-GST regime). This concept has been explained in the Education Guide issued by CBIC (earlier known as CBEC) in the year 2012 as under –

“Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. An example of ‘bundled service’ would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves di erential treatment as a manner of determination of value of two services for the purpose of charging service tax is di erent.”

Under the pre-GST regime, the taxability of a bundled service used to be determined in the following manner, namely :—

(a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character;

(b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.

Under GST regime, a composite supply would mean “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”.

Note: There is no straight method for determining whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined based on the facts involved.

Example: 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 the principal supply.

Mixed Supply

Under GST, a 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 a nutshell, mixed supplies are those supplies where supplies of goods or services or combination thereof are made, however, a single price is charged by the supplier against supply of such goods or services or combination thereof. It is relevant to mention here that the goods or services under mixed supply can be supplied independently by charging respective rate of tax on the value of each supply of goods or services, however, a single price is charged. Therefore, 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. 

Example: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink 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.