Tax liability in case of Mixed supply and composite supply :
The tax liability on a composite or a mixed supply shall be determined in the following manner — (a) 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 (b) a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax – section 8 of CGST Act.
“Principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary – section 2(90) of CGST Act.
“Composite supply” means a supply made by a taxable person to a recipient comprising 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(30) 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. Illustration: 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 – section 2(74) of CGST Act.
Comment on definition of mixed supp ly – The illustration given in ‘mixed supply’ does not match with the definition of ‘mixed supply’. Definition of ‘mixed supply’ does not refer to fact whether these can be supplied separately and independently. Even in case of ‘composite supply’, it is possible that the supplier may treat them as separate items e.g. he may charge separately for packing, outward transport and insurance.
Real difference is that in case of ‘composite supply’, the items are ‘naturally bundled’, but not in case of ‘mixed supply’.
The term ‘naturally bundled’ is not defined in CGST Act.