By integrating various indirect taxes, India’s Goods and Services Tax (GST) system has smoothed out the nation’s tax system. It has, in any case, likewise given various new suggestions, like mixed supply and composite supply. Businesses need to grasp the distinctions between these two expressions to really follow GST regulations. This blog will inspect the difference between mixed supply and composite supply under GST.
Understanding the Concept of Supply under GST
Before understanding the composite supply and mixed supply difference it’s important to understand what exactly supply denotes to. A “supply” is a fundamental term that fills in as the establishment for the tax collection from goods and services under India’s Goods and Services Tax (GST) system. Value-added tax (VAT), administration assessment, and extract obligation have all been supplanted by the GST, which plans to smooth out the tax collection process by bringing all backhanded expenses under one umbrella. Different exchanges, including the arrangement of goods and services, are viewed as provisions under the GST, including but not restricted to
Sale of Goods
The deal or transfer of goods starting with one individual and then onto the next, whether for consideration (money) or not, is viewed as a supply. This process is one of the most common practices in the business industry.
Provision of Services
Any exchange wherein administrations are delivered in return for cash or one greater or administration is alluded to as the arrangement of administrations. This can incorporate contribution proficient administrations, leasing land, or offering transportation.
Exchange or Barter
If products or services are traded between two people without cash exchange, the transaction still meets the GST definition of a supply. This basically comes under the exchange or we can say barter.
Transfer of Business Assets
If a business transfers equipment or other assets for a price, such as cash, it is seen as a supplier. During the time of requirement this is the most common practice in order to get money for the business.
Import and Export of Products
Importing and exporting products and services into India and doing the same from India are both considered suppliers. However, under registered GST, exports are often zero-rated, which means no GST is charged but input tax credits may be made.
Deemed Supplies
Some transactions that do not involve actual supplies may be regarded as such. Supplies could include, for instance, the distribution of free samples by a company or the transfer of items between locations of a corporation in various states.
Composite Supply and Mixed Supply under GST
Mainly there are two types of supplies under the Goods and Services Tax Laws. Both the types are described below in order to determine distinguish between composite supply and mixed supply:
Mixed Supply
A combination of products and services is known as a bundled supply. A bundled service was a combination of two or more services, and this concept was most prevalent in service tax. The standard procedures used in the sector will determine how the issue of bundled supply is handled in the usual course of business. Here are a few methods to spot them:
- If most customers anticipate receiving these services as a package, the package will be regarded as organically bundled. For instance, most corporate conventions opt for a combination of hotel rooms, auditoriums, and catering.
- It can be regarded as organically packaged if most service providers in the sector offer a bundle of services. For instance, most airlines offer a package deal including plane travel and food on board. It will also be possible to tell whether a group of services is packaged by looking at the characteristics of the individual services.
- A service gets bundled if there is a leading service and supplementary services in addition to it. For instance, complimentary laundry services are frequently offered to guests of five-star hotels. Laundry is a supplemental service; renting a room is the primary one. Laundry services are only available to guests who are staying at the hotel.
Composite Supply
A composite supply is characterized as giving at least two products or administrations typically packaged and given together in the standard course of business under India’s wares and Services Tax (GST) system. One part of a composite stockpile is considered the essential inventory, and different parts are viewed as strengthening or coincidental to the essential supply. How the significant inventory is classified decides a composite supplier’s tax treatment. Here are a few fundamental plans regarding composite supplies subject to GST:
- One of the items or services in a composite supply – the principle supply – is the primary element and determines the composite supply’s fundamental characteristics. The central supply determines the tax bracket and categorisation of the composite supply.
- Other supplies made in addition to the main supply are referred to as ancillary or incidental supplies because they are not separately identifiable. They are delivered as a unit with the primary supply.
- Taxation treatment: The central supply’s relevant GST rate determines the GST rate that applies to a composite supply. The tax calculation for composite supplies is made more accessible as a result. The primary supplier’s tax rate applies to the total value of the composite supply.
- A composite supply’s value is calculated by considering the total cost of the package, which is then utilized to compute GST.
- A typical illustration of a composite supply is a dinner at a restaurant, where both the food and the beverages are provided. Food supply is commonly regarded as the primary supply in such a scenario, and the GST rate that applies to the entire meal is based on the rate for food.
Why Is It Important to Know Composite Supply and Mixed Supply Difference?
For both commodities and services, the GST Council has established specified rates. The GST Law defines the GST Rate for each type of goods and services. Therefore, charges are straightforward to determine if you provide a certain commodity or service. However, the delivery of a good and a service can occasionally be linked or performed in tandem, even when they are not. The GST Act specifies how a supply of this kind must be rated. As a result, the ideas of mixed supply and composite supply become crucial and in the modern business world its really important to know the difference between composite supply and mixed supply. It facilitates accurate GST rate calculation and offers standard GST tax treatment for such supplies.
Key Difference Between Composite Supply and Mixed Supply
Frequently used in the context of taxation, notably in Value Added Tax (VAT) systems, are the words mixed supply and composite supply. These phrases describe various kinds of goods or transactions that contain both taxable and non-taxable components. The main difference between composite supply and mixed supply are listed in the following table:
| Aspect | Mixed Supply | Composite Supply |
| Definition | Consolidating at least two things or administrations into one arrangement where no less than one of them is burdened, and at least one of them isn’t. | A supply of items or administrations that is bundled and sold as a solitary unit at a solitary cost. |
| Tax Treatment | Depending on its individual tax rate or exemption status, each component is taxed separately. | Considered as a single taxable supply, and the entire bundle is taxed at a single rate. |
| Invoicing | Typically, separate invoices are generated for each component, and taxes are computed separately for each component. | A single invoice is generated with a single tax charge for the complete composite supply. |
| Input Tax Credit (ITC) | Taxes paid on each element of the mixed supply can be claimed as ITC. | The composite supply is typically not eligible for ITC because it is considered to be a single supplier. |
| Compliance Complexity | Taxes for each component of the mixed supply are more difficult to determine and compute. | Simpler taxes because just one supply is considered, and only one tax rate is applied. |
| Examples | A restaurant that serves both food and drink. | A wedding package that includes photography, decorating, and catering. |
Time of Supply in Case of Composite Supply
The composite supply will be regarded as a supply of services if the primary supply is a service (for instance, air transportation and food served on board). The rules about the timing of service offerings will be in effect. Similar to how the supply of commodities is the primary supply in the case of buying and shipping the goods. The regulations of the period of supply of goods shall be applicable, and the composite supply will be considered a supply of goods.
Time of Supply in Case of Mixed Supplies
When a service is subject to the highest tax rate, the mixed supply is regarded as a supply of services. The provisions concerning the timing of service providing would be relevant. Similar to this, if goods are subject to the highest tax rate, then the mixed supply will be regarded as a supply of goods. The provisions concerning the timing of service providing would be relevant.
Conclusion
For businesses to accurately comply with GST requirements, they must understand the difference between composite and mixed supply. Composite supply consists of goods or services that are naturally grouped together, as opposed to mixed supply, which has discrete components that might be given individually. In both situations, it is crucial to determine the major supplier and the associated tax rate. Businesses can ensure correct GST compliance and reduce potential tax liabilities by understanding these ideas.
FAQs
- Is Mixed Supply and Bundled Supply the Same?
Yes both of them are the same, only the two different names.
- What are the two types of supply under the GST?
Under the GST law there are two types of supply which includes:
- Mixed or Bundled supply
- Composite Supply
- What is the difference between mixed supply and composite supply?
There are many composite supply and mixed supply difference out of which one key difference is mentioned here. Mixed supply combines multiple goods or services, taxed individually, while composite supply groups goods or services as a single unit, taxed at the rate of the main supply.
- What all comes under the Mixed Supply?
Under the nixed supply following things will cover:
- Combination of goods/services.
- Supplied together or individually.
- Treated as a single supply.
- Taxed at the highest applicable rate.
- Components taxed separately.
- Classification based on principal supply.
- Different tax rates on components.
- Complex invoicing requirements.
- Impact on input tax credit.
- Compliance challenges.
- What will fall under the Composite Supply?
Following will come under the ambit of composite supply:
- Bundle of goods or services provided together.
- Integral to each other.
- Treated as a single supply.
- Taxed at the rate applicable to the principal supply.
- Components cannot be supplied individually.
