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Section
Section 8 of CGST Act . Tax Liability on mixed and composite supplies
April 5, 2020
Section 8
Tax Liability on Composite or Mixed Supplies
The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—
(a) 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; and
(b) 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.
Section 2(30) defines composite supply as
“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;
Illustration:-
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;
Section 2(74) defines Mixed Supply as
“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.
Illustration.—
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;
Section 2(90) defines Principal Supply as
“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;
Author Comments:-
Taxable persons should try to get their goods covered in composite supply as that will save them from their goods being taxed at highest rate from all of the goods and services supplied together, But goods should be naturally bundled. What constitutes Naturally Bundled or not naturally bundled:-
Suppose I want to sell salt and a bag, Salt 5 Kg cost 100 Rs (No GST applicable) 1 Bag Rs 500/- (5% GST Tax)
Argument :-
Seller Says that Since Salt is exempt, My Bag will also be exempt, as Bag is just a packing material. He wants to take GST Rate on Bag as 0% since his principal supply is exempt from Tax and this is just a packing material.
Decided:- No One in the Industry is packing Goods in so much higher price bag, this is not a general practice, The assessee is trying to evade taxes as they are not naturally bundled,
Assessee wants to sell Bag and in order to save taxes he filled salt in that. This will be treated as Mixed Supply and GST will be levied on complete amount i.e,. 600 Rs treated as Mixed Supply.
Please be careful while bundling the goods and services. |
Thanks
CA Rahul Gupta
