- Composite Supply: Naturally bundled items with one principal supply → GST rate of principal applies.
- Mixed Supply: Artificial combo sold for one price → Highest GST rate applies on full value.
- Use our quick checklist & examples to avoid wrong classification and penalties.
Composite Supply under GST Explained: Meaning, Principal Supply and Mixed Supply
Many businesses struggle to classify their supplies correctly under GST. Is it a composite supply or a mixed supply? This simple guide explains the meaning of composite supply, principal supply rules, how it differs from mixed supply, and includes examples and a quick decision checklist.
What is Composite Supply in GST?
A composite supply is a naturally bundled combination of two or more taxable supplies made together in the ordinary course of business. Among them, there is always a principal supply, the main element that gives the bundle its character.
- Legal reference: Section 2(30) of the CGST Act.
- Tax treatment: GST is charged at the rate applicable to the principal supply on the entire value of the bundle.
Examples of Composite Supply
- Machine sold with mandatory installation service.
- Hotel accommodation that includes complimentary breakfast.
- Freight service bundled with insurance for the same consignment.
What is Mixed Supply in GST?
A mixed supply is a combination of two or more independent supplies offered together for a single price that are not naturally bundled. In other words, the items could just as easily be sold separately.
- Legal reference: Section 2(74) of the CGST Act.
- Tax treatment: GST is charged at the highest applicable rate among the items in the pack on the total price.
Examples of Mixed Supply
- Diwali hamper containing chocolates, soft drinks, dry fruits, sold at one MRP.
- Festival combo pack of unrelated FMCG products sold together for a single price.
🔑 Comparison: Composite vs Mixed Supply under GST
| Criteria | Composite Supply (GST) | Mixed Supply (GST) |
|---|---|---|
| Bundling | Naturally bundled and supplied together in normal course of business | Not naturally bundled, clubbed together for one price |
| Principal Supply | Yes, there is one principal supply which decides GST rate | No single principal supply |
| GST Rate | Rate of principal supply applies on entire value | Highest GST rate among all items applies on entire value |
| Treatment | Treated as a single supply for GST purposes | Treated as separate supplies but taxed at highest rate |
| Example | Gold ring plus making charges, Machine plus installation | Gift hamper, Festival combo pack |
| Time of Supply (GST) | Follows time of supply rule for principal supply, helps in correct GST return filing | Follows general time of supply for each item, may increase compliance burden |
🕒 Time of Supply under GST (Simple Explanation)
The time of supply decides when GST becomes payable. For a composite supply, follow the principal supply’s time-of-supply rule, you do not compute it item wise. For a mixed supply, consider each item separately. Getting this right helps accurate GSTR-1 and GSTR-3B reporting and avoids interest or penalties.
📌 Real-World Composite vs Mixed Supply Examples
💍 Example 1: Custom Gold Ring Order (Composite Supply)
A customer buys a gold ring and pays making charges to the jeweller.
Both goods (gold) and service (making) are naturally bundled, this is a composite supply.
GST is applied at 3% (gold rate) on the entire invoice value including making charges.
🎁 Example 2: Diwali Jewellery plus Silver Coin Combo (Mixed Supply)
If a jeweller sells a gold bracelet with a free silver coin as a festive combo,
this becomes a mixed supply under GST because the two items can be sold separately.
GST must be charged at the highest rate among the items, usually the rate of gold jewellery.
💻 Example 3: Laptop with Pre-Installed Software (Composite Supply)
Buying a laptop that includes licensed operating system is treated as a composite supply,
with the laptop as principal supply. GST is charged at the laptop’s rate on the full price.
🛠️ Example 4: Annual Maintenance Contract for Machine (Composite Supply)
An AMC including spare parts plus servicing is treated as a composite supply of service.
Maintenance service is the principal supply, so GST is charged at 18% on the entire AMC value.
📱 Example 5: Mobile Recharge with OTT Subscription (Composite Supply)
Telecom bundles offering data plus OTT access are taxed as telecom service bundles,
so GST is charged at 18% on the combined price.
🏮 Example 6: Festival Hamper, Chocolates plus LED Lights (Mixed Supply)
A Diwali combo pack containing chocolates and decorative lights is not naturally bundled.
This is a mixed supply and the highest GST rate among the items applies on the entire pack value.
⚠️ Rates are indicative and may change, check the latest GST notifications before invoicing.
⚡ Quick Revision: Composite vs Mixed Supply
| 🔑 Key Point | 📦 Composite Supply | 🎁 Mixed Supply |
|---|---|---|
| Bundling Nature | Naturally bundled, one main supply | Artificial combo, no principal supply |
| GST Rule | Apply rate of principal supply | Apply highest rate in the bundle |
| Invoice Impact | Single consolidated supply | Still a single supply, but costlier tax |
| Real-Life Cue | Laptop plus OS, Gold plus Making Charges | Gift hampers, Buy 1 Get 1 Free offers |
💡 Key Takeaway: Always check if supplies are naturally bundled and identify the principal supply before deciding GST rate, it avoids errors, interest, and penalties.
📝 Practice Yourself, Quick GST Quiz
✅ Question 1: A supermarket offers “Buy 1 Detergent Pack & Get a Plastic Bucket Free”. Is this Composite Supply or Mixed Supply?
💡 Show Answer
👉 Mixed Supply, because the bucket and detergent are not naturally bundled and can be sold separately. GST at the highest rate (28% on detergent) applies to the full value.
✅ Question 2: You purchase a gold necklace and the jeweller charges separate making charges on the invoice. Is this Composite Supply or Mixed Supply?
💡 Show Answer
👉 Composite Supply, gold plus making charges are naturally bundled, and gold is the principal supply. GST at 3% (gold rate) applies on the total value including making charges.
✅ Question 3: A contractor constructs a new factory building including materials, labour, architect fees. How is this treated under GST?
💡 Show Answer
👉 This is classified as a Works Contract which is specifically treated as a supply of service under GST. GST at 18% applies on the full contract value, labour plus materials combined.
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Quick Check: Composite or Mixed Supply
- Are the supplies naturally bundled in the ordinary course of business?
Yes, go to Step 2 | No, Mixed Supply - Is there one clear principal supply that gives the bundle its character?
Yes, go to Step 3 | No, Mixed Supply - Are they normally supplied together to customers as one package?
Yes, Composite Supply, apply rate of principal supply | No, Mixed Supply
Note: If classification is still unclear, keep documentation and seek a professional opinion or an Advance Ruling under GST.
Composite Supply: naturally bundled with a principal supply, tax rate of principal applies. Mixed Supply: not naturally bundled, highest rate applies on full value.
Frequently Asked Questions (FAQ)
1. What is Composite and Mixed Supply under GST?
Under GST, a composite supply means two or more taxable supplies that are naturally bundled and supplied together in the ordinary course of business. A mixed supply is a combination of two or more individual supplies offered together for a single price, but which are not naturally bundled.
2. What is the Difference between Composite Supply and Mixed Supply?
The key difference lies in the principal supply. Composite supply has one main component that drives the entire supply, for example, goods plus freight where goods are principal. Mixed supply has no principal supply, so GST is charged at the highest applicable rate among all items.
3. Can you give Composite Supply Examples under GST?
- 📦 Manufacturing: Machine sold with mandatory installation, GST rate of the machine applies.
- 🚛 Logistics: Goods plus insurance plus transport, considered one supply, taxed as goods.
- 🏥 Healthcare: Health check up plus doctor consultation report, taxed as healthcare service.
4. Can you give Mixed Supply Examples under GST?
- 🎁 Retail: Festival gift hamper (chocolates plus soft drink plus snacks) sold for one price, taxed at highest GST rate.
- 🏨 Hospitality: Hotel package including stay plus spa plus wine bottle complimentary, entire package taxed at highest rate.
- 🛒 Wholesale: Combo offer of unrelated products (detergent plus bucket plus mop) for a single price, taxed at highest rate.
5. Where can I Download Composite and Mixed Supply PDF?
You can refer to the official CBIC GST flyers that explain Section 2(30) (Composite Supply) and Section 2(74) (Mixed Supply) of the CGST Act, 2017 with illustrations.