Mixed Supply & Composite Supply under GST
A mixed supply is one in which two or more individual supplies of goods or services are made as a single supply but such supply does not constitute as a composite supply.
For example, a departmental store makes a package on occasion of Diwali which consists of sweets, chocolates, and packed juices. This is not a composite supply as items can be supplied separately and are not dependent on each other.
The following illustration given in the Education Guide of CBEC referred to above can be a pointer towards a mixed supply of services: –
“A house is given on rent one floor of which is to be used as the residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts the highest liability of service tax. In this case, renting for use as the residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts the highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.”
GST rate in case of Mixed Supply
A mixed supply is considered as the supply of the good or service which attracts the higher rate of tax.
Therefore in the previous example, the highest of the GST rate applicable on sweets, chocolate, and packed juices will be applicable to the price of the complete pack.
Time of supply
There can be 2 conditions
Involves supply of a service liable to tax at higher rates than any other constituent supplies – Would be considered as a supply of services and therefore provisions applicable relating to the supply of services would be applicable.
Involves supply of goods liable to tax at higher rates than any other constituent supplies – Would be considered as a supply of goods and therefore provisions applicable relating to a supply of goods would be applicable.
Composite supply is a supply in which goods or services are bundled in the ordinary course of business.
For example, breakfast is provided with hotel room booking. In such case, it’s not possible to bifurcate the amount for breakfast and room booking separately.
Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below –
The perception of the consumer or the service receiver. If a large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business.
Majority of service providers in a particular area of business provide a similar bundle of services. For example, the bundle of catering on board and transport by air is a bundle offered by a majority of airlines.
The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in the better enjoyment of the main service.
Other illustrative indicators, not determinative but indicative of bundling of services in the ordinary course of business are –
There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use.
The elements are normally advertised as a package.
The different elements are not available separately.
The different elements are integrated into one overall supply – if one or more is removed, the nature of the supply would be affected.
There is no straight formula to determine whether a supply can be considered as a composite supply or not. Each case has to be examined individually on basis of the factors mentioned above. Also, there is a need to determine the principal supply in a composite supply.
Works contracts and restaurant services are classic examples of composite supplies, however the GST Act identifies both as a supply of services and chargeable to the specific rate of tax mentioned against such services.
GST rate in case of Composite Supply
In case of composite supply, GST rate applicable for principal supply will be levied on the whole amount of supply.
For example, GST rate of 5% will be applicable in case of breakfast but in case of the previous example, GST rate prescribed for the hotel room will be applicable on the whole amount charged from the client. Since the hotel room is the principal service.
Time of supply
There can be 2 conditions
Principal supply is a supply of service – Would be considered as a supply of services and therefore provisions applicable relating to the supply of services would be applicable.
Principal supply is a supply of goods – Would be considered as a supply of goods and therefore provisions applicable relating to the supply of goods would be applicable.
GST in case of Printing contracts
Circular No. 11/11/2017-GST dated 20th October 2017 has been issued to clarify the applicability of GST in case of printing contracts as in general paper and other materials are also provided by the printer and would constitute a composite supply.
In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.
In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wallpaper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff.