Composite Supply [Section 8(a) of CGST Act, 2017] - GST Ready Reckoner - GST

Composite Supply General Introduction The taxable event under GST is supply of goods or services or both. GST will be payable on every supply of goods or services or both unless otherwise exempted. The rates at which GST is payable for individual goods or services or both is also separately - notified. Classification of supply (whether as goods or services, the category of goods and services) is essential to charge applicable rate of GST on the particular supply. The application of rates will pose no problem if the supply is of individual goods or services which is clearly identifiable and the goods or services are subject to a particular rate of tax. But not all supplies will be such simple and clearly identifiable supplies. Some of the supplies will be a combination of goods or combination of services or combination of goods and services both. Each individual component in a given supply may attract different rate of tax. The rate of tax to be levied on such supplies may pose a problem in respect of classification of such supplies. It is for this reason, that the GST Law identifies composite supplies or mixed supplies and provides certainty in respect of tax treatment under GST for such supplies. Determination of tax liability of Composite Supply As per section 8(a) , The tax liability on a composite supply shall be determined in the following manner, namely: - 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. Further following composite supplies shall be treated as a supply of services, Mentioned in the schedule II ,namely:- (a) works contract and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. Time of supply in case of Composite supply If the composite supply involves supply of services as principal supply, such composite supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable. Alternatively, if composite supply involves supply of goods as principal supply, such composite supply would qualify as supply of goods and accordingly, the provisions relating to time of supply of goods would be applicable. Some clarifications on composite given by CBIC 1. Clarification on taxability of printing contracts The printing industry in India in particular faces a dilemma in determining whether the nature of supply provided is that of goods or services and whether in case certain contracts involve both supply of goods and services, whether the same would constitute a supply of goods or services or if it would be a composite supply and in case it is, then what would constitute the principal supply . It is to be noted that in case of composite supplies, taxability is determined by the principal supply. To address concerns of the printing industry, CBIC has come out with Circular no.11/11/2017-GST Dated 20.10.2017 , where in it is clarified as under. Where Content and physical input (material) provided by recipient - 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. Where only content are provided by recipient - In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper 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. 2. Retreading of tyres is supply of services but supply of retreaded tyre is goods, is composite supply and pre dominant element is process of retreading which is services. Rubber used for retreading is an ancillary supply. [ Circular No. 34 / 8 / 2018 -GST dated 01.03.2018 ] 3. Bus body building classification of this composite supply, as goods or service would depend on which supply is the principal supply which may be determined on the basis of facts and circumstances of each case. [ Circular No. 34 / 8 / 2018 -GST dated 01.03.2018 ] 4. Supply, erection and assembly of air conditioning plant is composite supply not a work contract and principal supply is supply of goods. 5. Supply and installation of pumps or fire control or radar systems at ship is composite supply. 6. Servicing of vehicles and cars which covers both goods and services. The taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case. case law refer following [ Circular No. 47/21/2018-GST Dated 08.06.2018 ] 7. where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply. [ Circular No. 201/13/2023-GST Dated 01.08.2023 ] 8. Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable. [ Circular No. 32/06/2018-GST Dated 12.02.2018 ] Important Case Laws 1. M/S. South Indian Federation of Fishermen Societies [2022 (61) G.S.T.L. 205 (A.A.R. - GST - T.N.)] - AMC of machines , it is cover both supply of goods services, the predominant intention is provide maintenance services. it is considered composite supply of services where the principal supply is services and the supply of goods is incidental to such supply of services. 2. Supply of Grated supari, lime and tobacco in single pack, it is a composite supply of goods, wherein chewing tabacco is the principal supply. [ M/S. Jainish Anant Kumar Patel, 2021 (1) TMI 493 - AAR, Gujarat ] 3. Supply of sale of space in print media along with designing , selling of space in print media, is a principal supply, it is a composite supply. [ Harmilap Media (P) Ltd. - 2020 (3) TMI 293 AAR Uttarakhand ] 4. T he principal supply of transmission and distribution of electricity is naturally bundled and supplied in conjunction with the related/ancillary services in the ordinary course of business, accordingly, in view of the provisions of clause (a) of section 8 of the CGST Act, the tax liability of such composite supply is required to be determined by treating the same as a supply of the principal supply namely, transmission and distribution of electricity. [ Torrent Power Ltd. Versus Union of India - 2019 (1) TMI 1092 - Gujarat High Court ]