Composite Supply & Mixed Supply Accounting under GST

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GST Council has clearly provided 1 for all goods and services. For most goods and services, the GST rates shall apply based on HSN code or SAC code. Thus the individual can assess the GST amount liable by the customer. However, in some supplies, the supply will consist of a combination of services or combination of goods or both which attract different GST rates, making GST tax calculation more complex. In such cases, the procedure laid down in the GST Act on accounting for composite supplies or mixed supplies can be used.

What is a Composite Supply?

A composite supply under GST means the supply consists of two or more taxable supplies of goods or services, naturally bundled and supplied together in the ordinary course of business, where one of the product deemed as the principal supply. For example, in the supply of an ice cream, the supplier provides both ice cream an eatable and a plastic spoon for consuming the ice cream. The GST rates and HSN code for ice cream and plastic spoon are very different. However, with the concept of composite supply, ice cream shall classify as principal supply and the GST rate applicable for ice cream shall apply for the entire supply.

GST Rate for Composite Supply

The GST rate applicable for a composite supply transaction can be determined based on the following manner:

If a composite supply consists of two or more supplies, one of which is a principal supply, then the supply should be taxed similar to the principal supply.

So in the case of the ice cream example, the principal supply would be ice cream as it is the principal supply in the transaction.

What is Mixed Supply?

Under GST, a mixed supply refers to the GST rates of two or more individual supplies of goods or services combined to create a single GST price for all the goods. Hence the supply of goods shall contrast with the composite supply of goods. The major difference between mixed supply and composite supply refers to the applicability of GST rate and bundling the goods in the ordinary course of business. In the example for composite supply, ice cream and plastic spoon were cited and bundling of those items is a normal trade practice. However, an example for mixed supply would be bundling of sweets, dry fruits, juices, clothes and crackers in a single package supplied for a single price. In this example, the bundling of sweets, dry fruits, juices, clothes and crackers shall apply as mixed supply as these products cannot be classified into ordinary trade practice.

GST Rate for Mixed Supply

The supplier of goods shall treat the supply as a mixed supply of goods when the supplied goods fail to get classified as a composite supply. In the case of goods classified as mixed supply, the supplier shall choose the product with the highest GST rate in the bundle and apply the highest GST rate for the entire supply of goods. Thus, in the above example of sweets, dry fruits, juices, clothes and crackers; if crackers attract 28% GST rate, then the 28% rate shall apply to the entire bundle.

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Frequently Asked Questions

Common questions about Composite and Mixed Supply Accounting under GST.

A composite supply under GST refers to a supply consisting of two or more taxable supplies of goods or services that are naturally bundled and supplied together in the ordinary course of business, where one of the components is considered the principal supply.

The GST rate applicable for a composite supply transaction is determined based on the principal supply. If a composite supply consists of two or more supplies, one of which is the principal supply, then the entire supply should be taxed at the rate applicable to the principal supply.

An example of a composite supply is the supply of an ice cream, where the supplier provides both the ice cream (the principal supply) and a plastic spoon for consuming the ice cream. The GST rate applicable to the ice cream would be charged for the entire supply.

The major difference between a composite supply and a mixed supply lies in the applicability of the GST rate and the bundling of goods in the ordinary course of business. A composite supply involves the bundling of goods or services in a manner that is considered a normal trade practice, while a mixed supply refers to the combination of two or more individual supplies of goods or services that do not constitute a normal trade practice.

In the case of a mixed supply of goods, the supplier shall apply the highest GST rate among the individual supplies within the bundle to the entire mixed supply.

An example of a mixed supply would be the bundling of sweets, dry fruits, juices, clothes, and crackers in a single package supplied for a single price. Since this combination of goods is not a normal trade practice, it would be considered a mixed supply, and the highest GST rate among the individual items would be applicable to the entire bundle.

Understanding the concepts of composite and mixed supplies under GST is crucial for businesses to accurately calculate and pay the correct GST amount on their supplies. Misclassifying a supply can lead to incorrect GST calculations, which may result in penalties or legal complications.

To ensure compliance with GST regulations for composite and mixed supplies, businesses should carefully evaluate their product offerings, identify the nature of their supplies (composite or mixed), and apply the appropriate GST rates accordingly. Seeking professional guidance or consulting GST experts can also help businesses navigate these complexities effectively.

Yes, the GST Council has provided specific guidelines and rules regarding the classification and taxation of composite and mixed supplies. These guidelines are outlined in the GST Act and related regulations, which businesses should refer to for accurate interpretation and implementation.

Yes, the classification of a supply as composite or mixed can potentially change over time due to changes in trade practices, product bundling, or regulatory updates. Businesses should regularly review their supplies and stay updated with any changes in GST regulations to ensure ongoing compliance.