Difference Between Mixed Supply & Composite Supply under GST

Updated on : March 17, 2023 - 1 p.m. 17 min read.

Mixed Supply and Composite Supply are two new concepts introduced under the Goods and Services Tax (GST) regime in India. These concepts cover the supplies made together, whether the supplies are related or not. A composite supply is when two or more goods or services are supplied together in a naturally bundled form, whereas a mixed supply is when two or more goods or services are supplied together, but they are not naturally bundled. The concept of composite supply under GST is similar to the concept of naturally bundled services under the Service Tax Law, while the concept of mixed supply is entirely new. These concepts are important to understand as they determine the GST rates and treatment of the supplies made.

What is a supply under GST?

In GST, the term "supply" is defined very broadly and covers all forms of supply of goods or services or both, including sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The key points to understand about the concept of supply under GST are:

Supply includes all forms of supply of goods and services, including sale, transfer, exchange, etc.
The supply must be made for a consideration, which may be in the form of money or non-monetary consideration such as barter.
The supply must be made in the course or furtherance of business, which means that supplies made for personal or non-business purposes are not covered.
Even supplies made without consideration, such as free samples or gifts, are considered to be supplies under certain circumstances.
The definition of supply under GST is very wide and includes activities that were not considered as supply under earlier tax regimes, such as works contracts and deemed supplies.

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

The concept of mixed supply and composite supply is important under GST because it helps in determining the applicable tax rate on the supply. The tax rate on a composite supply is determined based on the principal supply, whereas in the case of a mixed supply, the tax rate is determined based on the highest rate applicable to any of the individual supplies.

Additionally, the concept of mixed supply and composite supply also helps in identifying whether a transaction qualifies as a supply under GST or not. It also helps in determining the liability of the supplier to register under GST and collect tax on the supply.

What is a bundled supply?

In the context of taxation, a bundled supply refers to a group of products or services that are sold together as a package. This package can include different products or services that may or may not be related to each other. The concept of bundled supply is important because it can have implications for taxation, particularly under GST, as the taxability of a bundled supply can depend on whether it is treated as a composite supply or a mixed supply.

How to determine if supply is naturally bundled?

To determine if a supply is naturally bundled and cannot be separated, the following factors can be considered:

The nature of the services: If the services are such that they are normally provided in conjunction with each other and are aimed at achieving a single objective, then they may be considered as naturally bundled.
The understanding of the recipient: If the recipient understands the supply to be a single supply rather than separate supplies, then it may be considered as naturally bundled.
The industry practice: If it is common in the industry to provide the services as a package deal, then it may be considered as naturally bundled.
The pricing of the services: If the price of the services is not separately stated and is inclusive of all the services provided, then it may be considered as naturally bundled.

What is composite supply in GST?

Composite supply under GST refers to a supply made by a taxable person consisting of two or more goods or services, or a combination of both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business. In a composite supply, one of the goods or services is the principal supply, which determines the tax rate and tax liability applicable to the entire supply. The other supplies included in the composite supply are ancillary to the principal supply and are not separately identifiable. The tax rate applicable to a composite supply is the tax rate applicable to the principal supply.

How to determine if it is a composite supply?

To determine if a supply is a composite supply under GST, the following criteria must be met:

The supply must consist of two or more goods or services.
The goods or services must be naturally bundled or supplied together in the ordinary course of business. This means that they are commonly supplied together and are integral to the overall supply.
The components of the supply must be inextricably linked in terms of their nature, quality, and quantity.
The pricing of the supply must be combined, i.e., there must be a single price for the entire supply.

If all of these criteria are met, then the supply will be treated as a composite supply under GST, and the tax rate applicable to the principal supply will be applicable to the entire supply.

What tax rate will apply to composite supply?

The tax rate that will apply to a composite supply will depend on the principal supply, which is the main supply in the composite supply. The GST rate applicable to the principal supply will be the rate applicable to the entire composite supply. For example, if a composite supply consists of a software package and a maintenance service, and the software package is the principal supply, then the tax rate applicable to the software package will apply to the entire composite supply.

What is mixed supply in GST?

Mixed supply under GST refers to a supply of two or more goods or services made together by a taxable person for a single price, but where the goods or services are not naturally bundled together. In other words, a mixed supply occurs when two or more goods or services are supplied together in a single transaction, but they are not usually sold or provided together in the ordinary course of business.

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

To determine if a supply is a mixed supply or a composite supply under GST, we need to look at the following factors:

Nature of the supply: If the supply consists of two or more goods or services that are naturally bundled together, it will be considered a composite supply. However, if the goods or services are not naturally bundled together, it will be considered a mixed supply.
Identifiability: If the different goods or services in the supply can be identified as separate and distinct, it will be considered a mixed supply. If the goods or services cannot be identified separately, it will be considered a composite supply.
Intention of the supplier: The intention of the supplier at the time of supply is also an important factor. If the supplier intends to supply two or more goods or services as a package, it will be considered a composite supply. However, if the supplier intends to supply two or more goods or services separately, it will be considered a mixed supply.

Time of supply

The time of supply for composite supply under GST is determined based on the type of composite supply.

If the composite supply is a single supply, then the time of supply will be the same as the time of supply of the principal supply. For example, if a hotel provides a package of room stay and meals, and the room stay is the principal supply, then the time of supply for the entire package will be determined based on the time of supply of the room stay.

If the composite supply is a mixed supply, then the time of supply will be determined based on the individual supplies. For example, if a package includes the sale of a mobile phone and a case, and the mobile phone is liable to GST at a higher rate than the case, then the time of supply for the mobile phone will be determined based on the time of supply for goods, while the time of supply for the case will be determined based on the time of supply for services.

In both cases, the time of supply will be determined based on the provisions laid down in Section 12 of the CGST Act, 2017.

Time of supply in case of mixed supply

The time of supply in case of mixed supply under GST is determined based on the principal supply, i.e., the supply that constitutes the main element of the mixed supply.

If the mixed supply consists of goods or services that are subject to different tax rates, the time of supply will be determined based on the tax rate applicable to the principal supply.

For example, if a mixed supply consists of a mobile phone (18% GST rate) and a mobile phone case (28% GST rate), and the mobile phone is the principal supply, the time of supply for the entire mixed supply will be determined based on the 18% tax rate applicable to the mobile phone.

Example of Composite and Mixed Supply

Here's an example of works contract under GST:

Mr. A is a contractor who has entered into a works contract with Mr. B for the construction of a building. The contract includes the supply of materials such as cement, steel, and bricks, as well as services such as labor and construction supervision.

As per GST law, a works contract is considered as a composite supply. However, in this case, it is also a mixed supply since it involves the supply of both goods (materials) and services (labor and construction supervision).

The value of the materials and services involved in the contract is as follows:

Value of materials: Rs. 10,00,000
Value of services: Rs. 5,00,000

Since this is a composite supply, the tax rate applicable will be the same for both materials and services. Assuming a GST rate of 18%, the tax liability will be calculated as follows:

GST on materials: Rs. 10,00,000 x 18% = Rs. 1,80,000
GST on services: Rs. 5,00,000 x 18% = Rs. 90,000

Total GST liability = Rs. 1,80,000 + Rs. 90,000 = Rs. 2,70,000

In case of works contract, the time of supply for goods and services will be determined separately based on the applicable rules. For instance, the time of supply of goods will be the date of delivery of goods or the date of issue of invoice, whichever is earlier. The time of supply of services will be the date of completion of service or the date of issue of invoice, whichever is earlier.

By Amit Pawar

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