Composite vs Mixed Supply Classifier
Are you selling a bundle of goods or services for a single price? Use this interactive questionnaire to determine your supply classification and the correct GST rate.
Frequently Asked Questions
Understanding Supply Classifications.
What is a Composite Supply under GST?
A composite supply consists of two or more goods/services that are naturally bundled and supplied together in the ordinary course of business. One of them is a principal supply (e.g., buying a laptop that comes with a charger and warranty).
What is a Mixed Supply under GST?
A mixed supply consists of two or more independent goods/services bundled together for a single price, which are NOT naturally bundled. They can be sold separately (e.g., a Diwali gift hamper containing chocolates, dry fruits, and aerated drinks).
How is GST calculated on a Composite Supply?
For a composite supply, the GST rate of the "Principal Supply" applies to the entire bundle. For example, if you buy a laptop (18%) and it comes with a bag (18%), the entire value is taxed at the rate of the laptop (principal item).
How is GST calculated on a Mixed Supply?
For a mixed supply, the GST rate of the item with the HIGHEST tax rate in the bundle applies to the entire bundle. If a hamper has dry fruits (12%) and aerated drinks (40%), the whole hamper is taxed at 40%.
What does "naturally bundled" mean?
Naturally bundled means that the combination is largely standard industry practice, and buyers expect them to be provided together. They are intrinsically linked (e.g., air transport and the food served on the flight).
Is a hotel booking with free breakfast a composite supply?
Yes. Accommodation with breakfast is naturally bundled in the hotel industry. The principal supply is the accommodation, so the entire package will be taxed at the hotel room rate (e.g., 12% or 18%).
If I sell items separately on the same invoice, is it a mixed supply?
No. If you sell items and itemize their prices separately on the invoice, it is neither a composite nor a mixed supply. It is simply a multiple individual supply. You charge the respective GST rate for each item.
What is a Principal Supply?
The principal supply is the pre-dominant element of a composite supply. It is the primary reason the customer is buying the bundle. The other elements are ancillary (e.g., transport insurance is ancillary to the transport of goods).
What happens if I classify a mixed supply as a composite supply?
If you classify a mixed supply as composite, you will likely apply a lower tax rate to the bundle. During an audit, the GST officer can demand the differential tax at the highest rate, along with interest and penalties under Section 73/74.
Is buying a car with an extended warranty a composite supply?
No, usually extended warranties sold at the time of car purchase are treated as a separate supply if they are optional. However, the standard mandatory warranty included in the car price is part of the composite supply of the car.