Composite Supply & Mixed Supply Accounting under GST

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Composite Supply & Mixed Supply Accounting under GST

The GST Council has clearly provided GST rates 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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