composite supply, Goods and Services Tax - GST

[CA.ANCHAL RASTOGI]

A CONTRACTOR GETS A ORDER FROM A OFFICE FOR ELECTRIC WIRING FIXING OF LIGHT AND FAN. IN ORDER IT IS SPECIFICALLY MENTIONED THAT WHICH MAKE AND MODEL OF ITEMS WILL BE USED BY THE CONTRACTOR. IN WORK ORDER, TOTAL CONSIDERATION IS FIXED FOR A SINGLE AMOUNT FOR SUPPLY OF BOTH GOODS AND SERVICES.

WHETHER IT IS QUALIFIED AS COMPOSITE / MIXED SUPPLY. WHETHER IT MAY BE TAXED @ 18% ASSUMING SUPPLY OF SERVICE AS PRINCIPAL SUPPLY.

Posts / Replies

[KASTURI SETHI]

It is Composite supply.

[Rajagopalan Ranganathan]

Sir,

Section 2 (30) of CGST Act, 2017 defines “composite supply”as a supply made by a taxable person to a 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;

Illustration: 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.

Section 2 (74) of the same Act defines "“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;

Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks 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.

You have stated that TOTAL CONSIDERATION IS FIXED FOR A SINGLE AMOUNT FOR SUPPLY OF BOTH GOODS AND SERVICES. Therefore supply made by you can be treated as mixed supply.

Section 8 of the same Act stipulates that "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; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

In view of the legal provisions you take appropriate decision regarding the rate of tax payable.

[Shipra Garg]

Sir,

With due regard to experts, I believe the distinction in Sec 2(30) and Sec 2(74) can always be traced with the help of contract terms. Even if you invoice the client as ‘supply of services’ does not change the nature of supply(ies) made.

Whenever make and models of items is specifically mentioned in work order you can always use item wise tax rates structure.

But since the consideration is fixed and the invoice is not supply specific, as stated, this should be a mixed supply.

Recommended: If possible, use item wise invoice for supply of material and labour, appropriating the profit margin on value basis, to avoid higher rate of tax.

Legal provision are beautifully explained by Mr. Rajagopalan Ranganathan.

[Himansu Sekhar]

Since it involves both supply of goods and services, it will be works contract service, 18%'tax for non govt. Offices.