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Relevant Legal Provisions
Section Rules
Section Subject Matter Rules Subject Matter
CGST Sec. 8 Tax liability on composite and mixed supplies

IGST Sec 20 Application of provisions of CGST Act, 2017

- Sec 8 has been made applicable

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Tax treatment
Supply of (Goods X + Goods Y) Apply Sec 8
Supply of (Service X + Service Y) Apply Sec 8
Supply of (Goods X + Service X) Apply Sec 8 (but only if no deemed treatment is otherwise provided)
GST law providing for deemed treatment of a particular supply. Follow that
• Schedule II- Para 6 (Deemed Treatment) or deemed treatment.
• Sec 7(3) (Deemed treatment – given by notification)
GST law not providing for deemed treatment of a particular supply Apply Sec 8
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Manner of application of Sec 8

Step-1 Check if it is COMPOSITE SUPPLY (as Yes Treat this combination as per Sec 8(a)
defined in Sec 2(30) of CGST Act) Supply of combination = Supply of principal supply

Step-2 Check if it is MIXED SUPPLY (as defined in Yes Treat this combination as per Sec 8(b)
Sec 2(74) of CGST Act) Supply of combination = Supply of that supply which is
attracting highest rate of tax

Composite Supply vs Mixed Supply

COMPOSITE SUPPLY (CS) MIXED SUPPLY (MS)
Definition Defined in Sec 2(30) of CGST Act Defined in Sec 2(74) of CGST Act
Identification Multiple taxable Supplies to single recipient Multiple Supplies to single recipient
Test • One of supply is principal supply • Such supply is not composite supply
• Other is ancillary • Supply is for a consolidated price
(Further, such combination must be one which is natural one and
which is normally made in ordinary course of business)
Combination CS = Combination of taxable supplies MS = Combination of any supplies
[Combination of ‘taxable supply (say, chocolates) and [Combination of ‘taxable supply (say, chocolates) and
‘non-taxable supply (say, Alcoholic Liquor) may be a
‘non-taxable supply (say, Alcoholic Liquor) cannot be a
mixed supply]
composite supply]
Consolidated Charging consolidated pricing for multiple supply is not Charging consolidated pricing for
price necessary to make them ‘composite supply’. multiple supply is must to make it ‘mixed
ICAI Guide: An example of this can be that a company is engaged supply’.
in supply of machine at Rs 1 lac per machine. The said machine
can be installed through a third party or the supplier of machine
can also undertake such installation. The charges for installation
are Rs 10 thousand. Now if the company executes a contract for
supply and installation of the machine at Rs 1,10,000 with charges
for machine supply and installation services identified separately
in the invoice, then the supply shall still remain a composite supply
because both supplies are in conjunction with each other and
installation is ancillary to the predominant supply of machine. In
this case, the predominant supply shall be supply of machine only.
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Sec 8: Treatment of COMPOSITE SUPPLY & MIXED SUPPLY

1. What is composite supply? Illustrate with an example.

(IDTC FAQ) (MTP CA Inter- March 2018)
Ans. In terms of Section 2(30) of CGST Act, 2017 composite supply means supply made by taxable person to 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.
The example of composite supply is:
o 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.

Author’s Note:
1. Composite Supply = two or more taxable supplies + naturally bundled + supplied in conjunction with each other
(i.e., supplied together in ordinary course of business) + One supply must be principal supply
.

 Supply of books with coaching classes is composite supply.

 This supply is composite supply even if books are charged separately.
 Entire supply shall be treated as ‘supply of coaching service (as that supply is principal supply)

Naturally Bundled + Supplied in conjunction with each other in ordinary course of business
For qualifying as composite supply, activities should be naturally-bundled. While selling a car, it is natural for the car dealer to
supply standard accessories such as extra set of tyres, tools necessary to replace the tyres, first aid box etc. All these supplies
are naturally bundled. Car dealers generally do not engage in imparting driving training. If a dealer agrees to arrange training
also and charges for it, the activity of training will not fit into the concept of composite supply as it is neither ‘naturally bundled’
nor ‘in the ordinary course of business’.
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For qualifying as composite supply, composition should be in the ordinary course of business. A readymade garment is put into
transparent polyethylene bag and that bag is put into a bright print card board box. This is in ordinary course of business.

2. Composite Supply = two or more taxable supplies

3. Combination of (taxable supply + non-taxable supply) (e.g., supply of chilly paneer with Beer/Wine) = Not composite
supply
o Supplier is advised to show the charges of each of supply separately so that these cannot be even treated as ‘mixed
supply’.
o Both the supplies shall be treated independently. Non-taxable supply shall not attract GST.

2. How would the tax liability be determined in case of Composite supply?

(IDTC FAQ)
Ans. In terms of Section 8 of the CGST Act, 2017 tax liability in case of composite supply should be determined with reference to
the principal supply forming part of such composite supply.

Author’s Note:
1. Supply of (Face to face coaching classes and books) = Supply of coaching services (principal supply being supply of service)
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2. Identification of ‘principal supply’:

• Principal Supply: It is the supply which is the aim of the customer/recipient and that's why it predominates the
combination.
• Ancillary Supply: A supply shall be regarded as ancillary if it does not constitute the customer/recipient an aim in
itself, but is a means of better enjoying the principal service supplied.
Illustration
Supply of goods with delivery at recipient’s place – principal supply is of ‘goods’, ancillary supply is of ‘service- transportation’
i. Aim of recipient is to obtain goods – thus, supply of goods is principal supply
ii. Transportation is ancillary supply – it is not an aim in itself.
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3. What is Mixed Supply? Illustrate with an example.
(IDTC FAQ)
Ans. In terms of Section 2(74) of CGST Act, 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.
The example of mixed supply is:
A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink 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.

Author’s Note:
1. Supply of (laptop with printer) for single price = Mixed supply

4. How would the tax liability be determined in case of Mixed supply?

(IDTC FAQ)
Ans. In terms of Section 8, the tax liability in case of a mixed supply shall be ascertained with reference to that particular supply
which attracts highest rate of tax.

Examples for practice

5. Agrawal Carriers is a Goods Transport Agency (GTA) engaged in transportation of goods by road. As per the
general business practice, Agrawal Carriers also provides intermediary and ancillary services like
loading/unloading, packing/unpacking, transhipment and temporary warehousing, in relation to transportation
of goods by road.
With reference to the provisions of GST law, analyze whether such services are to be treated as part of the
GTA service, being a composite supply, or as separate supplies.
(MTP May 2018 - CA Final)
Ans. In terms of Section 2(30) of CGST Act, 2017 composite supply means supply 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.
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The GTA provides various intermediary and ancillary services, such as, loading/unloading, packing/unpacking, transhipment
and temporary warehousing, which are provided in the course of transport of goods by road. These services are not provided
as independent services but as ancillary to the principal service, namely, transportation of goods by road. The invoice issued
by the GTA for providing the said service includes the value of intermediary and ancillary services.
In view of this, if any intermediary and ancillary service is provided in relation to transportation of goods by road, and
charges, if any, for such services are included in the invoice issued by the GTA, such service would form part of the GTA service,
being a composite supply, and would not be treated as a separate supply. However, if such incidental services are provided as
separate services and charged separately, whether in the same invoice or separate invoices, they shall be treated as separate
supplies.**

** Separate pricing / invoicing: - Impact on being composite supply or mixed supply.

• Supply can never be treated as mixed supply - [Sec 2 (74) clearly provides for that]
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• Supply may be treated as composite supply - [Under Sec 2 (30), there is no requirement as to single pricing or separate
pricing of same in invoice]
If combination is of ‘principal supply and ancillary supply”, then such combination may still be treated as ‘composite supply’
even if such supplies are separately priced or charged. This may be so done in exceptional situation.
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• Generally, separate pricing indicates separate supplies. In circular mentioned below, CBIC seems to be suggesting
that supplies by GTA shall be treated as ‘separate supplies’ as both are being charged separately.
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• Also look at the following:

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Circular No. 47/21/2018-GST – 8 June, 2018

Issue: How is servicing of cars involving both supply of goods (spare parts) and services (labour), where the value of goods
and services are shown separately, to be treated under GST?
Clarification:
 The taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances
of each case.
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 Where a supply involves supply of both goods and services and the value of such goods and services supplied
are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services
separately.
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What to do in exams?
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In exams, in general, separately charged/ invoiced supplies to be treated as ‘separate supplies’.

6. Determine whether the following supplies amount to composite supplies:

(i) A hotel provides 4 days-3 nights package wherein the facility of breakfast and dinner is provided
alongwith the room accommodation.
(ii) A toothpaste company has offered the scheme of free toothbrush alongwith the toothpaste.
(MTP April 2018 – CA inter– 2 ½ marks each) (MTP May 2018 – CA Inter)
Ans. In terms of Section 2(30) of CGST Act, 2017 composite supply means supply 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.
In view of the same,
(i) since, supply of breakfast and dinner with the accommodation in the hotel are naturally bundled, said supplies qualify
as ‘composite supply’.
(ii) since supply of toothbrush alongwith the toothpaste are not naturally bundled, said supplies do not qualify as
‘composite supply’.

7. Brishti Ltd. is manufacturer of cosmetic products: (1) Hair oil (GST Rate - 18%), (2) Sun screen cream (GST Rate
- 28%), (3) Shampoo (GST rate - 28%) and (4) hair comb (GST Rate - 12%).
The said products are supplied in a single package and the Price per package is Rs. 500 (exclusive of taxes).
20,000 packages were supplied by the company to its dealer. Determine the nature of supply and its tax liability.
[CMA Inter - MTP Dec 2018 -5 Marks]
Ans. The treatment would be as follows:
Nature of Combination Supply Mixed supply
Each of the goods in the package have individual identity and can be supplied separately, but are deliberately
supplied conjointly for a single consolidated price. Hence, the supply would constitute a mixed supply.
Treatment under GST : Highest tax rate applicable 28% GST
As per section 8(b) of the CGST Act, tax rates applicable in case of mixed supply would be the rate of tax
attributable to that one supply (goods, or services) which suffers the highest rate of tax from amongst the
supplies forming part of the mixed supply. Therefore, entire package will be chargeable to 28% GST.
Value of Supply 500
Value of taxable supply per package
No. of packages 20,000
Total Value 1,00,00,000
GST Liability @ 28% 28,00,000

Latest Issues / Clarifications

[All clarifications as given in CA Study Material – for May, 2019]

Activity Circular / Clarification
Re-treading Circular No. 34/ 8/ 2018-GST – dated 1st March, 2018
of tyres
Supplier buying old-tyres – does re- = Supply of Tyres/ Goods [Heading 4012]
treading – supplies re-treaded tyres
Supplier doing re-treading on old tyres • Re-treading = (supply of goods/rubber and supply
belonging to others of service/labour) = Composite Supply
(rubber used in re-treading belongs to • The pre-dominant element is the process of re-
supplier) treading which is a supply of service. Rubber
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(goods) used for re-treading is an ancillary supply
= Supply of service [applying Sec 8(a)]

Printing Circular No. 11/ 11/2017-GST -- dated 20th Oct, 2017

Activity
Supplier (printer/Mr. A) is doing printing
of books, pamphlets, brochures,
annual reports, and the like.
Contents : Belongs to recipient of goods
(the publisher or the person who owns
• Printing = (supply of paper and supply of
service/labour) = Composite Supply
• predominant supply is that of the supply of
printing of the content.
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the usage rights to the intangible inputs);
Physical inputs including paper :
Belongs to printer/Mr. A;
Supplier (printer/Mr. A) is doing printing
envelopes, letters cards, printed
boxes, issues, napkins, wall paper etc.
Designs, logo etc.: Belongs to the
recipient of goods;
Physical inputs including paper :
Belongs to printer/Mr. A;
= Supply of Service [Heading 9989] - [applying Sec
8(a)]
• Printing = (supply of paper and supply of
service/labour) = Composite Supply
• 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
= Supply of Goods [Chapter 48 or 49] [applying Sec
8(a)]

Bus Building Circular No. 52/ 26/2018-GST -- dated 9th August, 2018
Activity
Bus body builder builds a bus, working . = Supply of Goods (bus) [Chapter 87- GST@28%]
on the chassis owned by him and
supplies the built-up bus to the customer,
and charges the customer for the value of
the bus.
Bus body builder builds body on • Fabrication of body on chassis provided by the
chassis provided by the principal for principal (not on account of body builder), the
body building, and charges fabrication supply would merit classification as service,
charges (including certain material that and 18% GST as applicable will be charged
was consumed during the process of job- accordingly.
work) = Supply of Service [Heading 9988 -GST@18%] -
[applying Sec 8(a)]

[Expected]
8. Mr Joshi is running a Laxmi printing press in Pune. Discuss GST treatment of following activities carried out by Mr
Joshi:
1) Purchase of paper, printing calendars thereon and selling/supplying calendars in market. The consideration
received from such sale is Rs 1,00,000.
2) Purchase of paper, Printing books for DG Education Pvt Ltd. (the content of book belongs to DG Education Pvt.
Ltd.) and supplying same to DG Education Pvt. Ltd. The consideration charged is Rs 3,00,000 (including cost
of paper).

Ans. Post GST, printing industry asked for clarification on similar issues. To address concerns of the printing industry, CBIC has come
out with Circular No. 11/11/2017-GST dated 20.10.2017. Considering the clarification issued by CBIC, GST treatment of
given activities shall be as follows:

1) Purchase of paper, printing calendars thereon and selling/supplying calendars in market. The consideration received is Rs.
1,00,000.
It is case of manufacture of calendars and sale thereof. Thus, it is simple case of supply of goods.
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2) Purchase of paper, Printing books for DG Education Pvt Ltd. (the content of book belongs to DG Education Pvt. Ltd.) and
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supplying same to DG Education Pvt. Ltd. The consideration charged is Rs 3,00,000 (including cost of paper).
It is not simple case of manufacture of book and sale to DG Education Pvt. Ltd. Laxmi Printing press cannot be said to be
have made out sale of books as they are not owning the content of book. Laxmi Printing is carrying out printing activity on
paper belonging to it. Thus, this supply is composite supply (supply of paper/goods and supply of printing/service).
Printing service being principal service, the composite supply shall be treated as ‘supply of service’ (Sec 8 of
CGST Act).
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Author’s Note:
1. Above answer is based on recent clarification issued by CBIC in its Circular No.11/11/2017-GST.
2. In above case, content of book is of prime importance and that is owned by DG Education Pvt. Ltd. and not by the Laxmi
Printing Press. Laxmi Printing press is principally supplying printing services, even in case where it is using its own paper for
printing. In no such circumstance, Laxmi Printing Press can be said to be the supplier of goods/books.

Latest Advance Rulings under GST

Photo Products Company Printing of Photograph on photo-paper is 'service'

Pvt. Ltd. - 2018 – AAR Printing of content supplied by customers on photographic paper is a service because printed
material had no value as independent goods.
Therefore, applicant cannot be said to be supplying goods [Printed Matter]; applicant was
providing service of printing.

Switching Avo Electro
Power Limited - 2018 –
AAR
Supply of UPS with storage battery – may be Composite supply, may be Mixed supply
• Storage battery has multiple uses and can be put to different uses.
• Supply of storage battery separately with static converter (UPS): it is not a naturally bundled
supply and hence, not composite supply. It is a mixed supply.
• Supply of UPS with inbuilt batteries : supply of battery is inseparable from supply of UPS, it
should be treated as a composite supply.

Ge Diesel Locomotive
Pvt. Ltd. - 2018 – AAR
Annual Maintenance Contracts involving incidental supply of spares/parts = Supply
of service
Annual maintenance contracts for a fixed price involving supply of spare parts/goods is naturally
bundled and is a composite supply.
Principle supply being supply of service, it shall be treated as "supply of service"

Kims Health Care Medicines, consumables and implants used in the course of proving health care
Management Ltd. -2018 – services – Principal supply is health care and exempt
AAR Medicines, consumables and implants used in the course of providing health care service to in-
patients for diagnosis or treatment hospital or clinical establishment are Indispensable items of
treatment and naturally bundled in ordinary course of business with health care services
• CBIC Circular No. 27/011/2018-GST: Room rent charged from patient in hospital is also
health care service and hence, exempt. Also, food supplied to inpatients as advised by
doctor/nutritionist is part of composite supply of health care and not separately taxable.
Same principle applicable in case of dispensing of medicine also.
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