: Composite Supply in GST

COMPOSITE SUPPLY

Brief overview

GST is payable on supply of goods/ services at a rate notified by the government. In case of supply of single goods/ services poses no problem for determination of applicable GST rate, if they are clearly identifiable. However, some of the supplies are a combination og goods/combination of services/ combination of services and goods wherein each individual component of such supply attract a different rate of tax. In such cases, determination of applicable rate of tax to be levied on such supplies may be a challenge. To address this issue, the GST law categorises such supplies into composite supplies and mixed supplies.

Composite supply

U/S 2(30) of CGST Act, 2017 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 ordinary course of business,

§ and out of all supplies, one of which is principal supply. (Principal supply means predominant element of composite supply for which other supplies forming part of composite supply play an ancillary role)

Condition for composite supply

Any supply of goods or services will be treated as composite supply if it satisfies the following conditions simultaneously:

1. supply of two or more taxable supply

2. it is naturally bundled i.e., goods or services are usually provided together in normal course of business. They cannot be separated.

3. One of the supplies must be principal supply.

Tax liability for composite supply

As per sec. 8 of CGST Act, 2017 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.  Accordingly the tax rate applicable for the goods or services which is treated as principal supply is the rate of tax for composite supply.