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GST is different than the current taxation system in many ways. However, one of the biggest changes is what constitutes as a taxable event. Talking about today, while the taxable event for VAT is the “sale of goods”, and of Service Tax is “provision of taxable services”, and of Central Excise is “removal of excisable goods”, GST has just one, which is “supply of goods and/or services”. Once GST is implemented, the concept of manufacturing, selling, etc. will be eliminated from the taxation point of view. Instead, the focus will be only on the “supply” of goods and/or services.

Supply in GST

While the concept of “supply” is fairly easy to understand in GST, there are two categories of the same which may be somewhat confusing for an individual.

These are:

● Composite supply

● Mixed supply

Understanding the difference between the two is important as it will help you determine how GST is levied in both cases.

Composite Supply

Composite supply is not something that’s entirely new. It’s similar to the concept of bundled services under the Service Tax Law. As per GST Act, Section 2(30), composite supply means a supply of two or more goods/services in a bundle, in which one is the principal supply (the predominant or primary item in the bundle).

For a supply to be considered as a composite supply the following two conditions must be met:

● It should comprise of 2 or more goods and/or services

● It should be a natural bundle. In other words- the goods and/or services

In the bundle should be provided together in the normal course of business and can’t be separated.

Since in a composite supply there are multiple items which may attract different GST rates, the bundle is taxed at the rate of the principal supply.

Let’s consider an example:

A hotel offers a 3 days-2 nights package under which food is also covered. Now, let’s say the rate of GST for accommodation is 28%, and that for food is 18%.

Since the whole package is supplied as a natural bundle, and the principal supply is the accommodation, the rate of tax levied on the entire bundle would be 28%.

Mixed Supply

As per GST Act, mixed supply is a supply of two or more supplies of goods and/or services that are combined together for a single price. However, unlike composite supply (refer the second condition), here the supplier can sell both supplies individually too.

In a mixed supply, the rate of tax on the bundle is determined by the item that has the highest rate of tax.

Let’s consider an example:

A trader is selling pastries, cakes, and namkeen in a bundle. This would constitute as a mixed supply because it’s possible for the seller to sell these items separately. Now, since pastries and cakes attract an 18% GST rate, and namkeen a 12% GST rate, the rate applicable on the complete bundle would be 18% (it being the highest).

If you are going to sell goods/services under GST regime then you can bundle them in a way that you can get the maximum benefit. And of course, understanding the types of supply- composite and mixed is essential for that.

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