Composite Supply under GST

Last Update Date : April 30, 2019
Estimated Read Time: 5 min

composite supply

GST is payable on individual goods or services at the given rate. The application of rates is easy to identify in case if there is a supply of individual goods or services. However, where there are 2 or more than 2 supplies in a combination, then each supply may attract a different rate of tax. In such a case, determining the actual rate to be charged on the combination may be a challenge. Thus, there is a requirement of identifying whether it is a composite or mixed supply.

What is Supply under GST?

The term “supply” includes all forms of supply of goods or services. The two main pre-requisites are that the supply should be for consideration (other than 1st Schedule) and it should be related to business or incidental to it.

Supply includes

  • Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal of goods/services
  • Import of services for consideration (even if it is not for the furtherance of business)

What is Mixed Supply?

If 2 or more individual supplies are supplied together for a single price, and it does not fall in the ambit of Composite supply and is not bundled naturally (can be supplied individually in the regular course) then such supplies are known as mixed supply.

Example: Gift hamper including cosmetics of different types and different brands supplied together.

Applicable Tax Rate for Mixed Supply

In case of mixed supply, the supply of two or more supplies shall be treated as a supply of that particular supply that attracts the highest rate of tax.

What is Composite Supply?

Composite supply consists of 2 or more taxable supplies which are naturally bundled and are supplied in conjunction with one another in the ordinary course of business, amongst which one is a principal supply.

A supply will be considered as a ‘composite supply’ if the following elements are present:

  1. The supply should consist of two or more supplies which are taxable;
  2. The supplies can be of goods or services or both.
  3. The supplies should be bundled naturally (usually provided together in the normal course of business).
  4. One of the supplies from which is a principal supply.

To determine whether it is a composite supply or not, we should first check whether there is some principal supply and also whether the Items are bundled naturally.

“Principal supply” in context of composite supply means it is the predominant supply of goods or services in a composite supply and to which any other supply is supportive or in conjunction with the other.

A composite supply may usually occur due to either of the following reasons:

  • Sales strategy to attract more and more customers. (Example: Toothpaste and Toothbrush sold together)
  • Similar nature or type of goods or services, which requires them to be naturally bundled or supplied together in the regular course. Example: Mobile and charger.

Applicable Tax Rate for Composite Supply

The tax rate of the “Principal supply” will be applicable on the entire supply.


The goods are packed and transported with insurance copy. The supply of goods, packaging materials, transport and insurance copy, is a composite supply.
It satisfies all the following conditions as mentioned above:

  1. Insurance and transport are usually supplied in the regular course of business (Naturally bundled)
  2. As the insurance and transport cannot be supplied separately if the goods are not present, we can identify the principal supply which is the supply of goods.
  3. Insurance and transport are often marketed as a package, and a single price is also charged in respect of the same.

Thus, the tax liability will be the tax on the principal supply, i.e., GST rate on the goods.
If the second condition is not fulfilled, it becomes a mixed supply.

Factors to Determine Composite Supply

A supply of goods and services will be considered as composite supply if it fulfils the following criteria:

  1. Supply of two or more goods or services together.
  2. It is characterised as a naturally bundled supply, i.e. the goods or services are usually provided together in the ordinary course of business.
  3. If a large number of receivers of such supplies expect that it should be provided as a package, then it will be considered as composite supply.
  4. If the elements are normally advertised and marketed as a package.
  5. Single price is paid for the package.

Difference Between Composite Supply and Mixed Supply

Composite Supply Mixed Supply
Consists of two or more supplies Consists of two or more supply
Naturally bundled Not naturally bundled
Supplied in conjunction with each other Though can be supplied independently, still supplied together
Tax liability shall be the rate of principal supply Tax liability shall be the rate applicable to the supply that attracts the highest rate of tax
One of which is principal supply No such bifurcation of principal supply as supplies can be provided individually as well
Example: Charger supplied along with mobile phones.

WCT, Restaurant services.

Example: A Diwali gift pack comprising of chocolates and sweets.

Illustrations for Composite Supply

  1. You are booking a train ticket, where the cost includes a meal as well. It is a naturally bundled supply. It is a composite supply where the products or the goods or the services with it cannot be sold differently. You will not buy just the train meal and not the ticket of the train. The transportation of passengers from one place to another is, therefore, the principal supply.
  2. There is a hotel which provides stay packages along with breakfast in the cost. This is a natural bundling of services in the normal course of business. The service which is provided for staying in a hotel is the principal supply, and shall, therefore, be treated as a supply of providing hotel accommodation which is a composite supply.
  3. A training programme is organised within an institute. The total package of the programme includes training by the faculty, there is also a provision of study material and providing high tea to the trainees. Here the training programme is composite supply with the principal supply being training by the faculty.
  4. A dealer sells CCTV Camera and does the installation of the same at the customer’s premises. This is a case of composite supply of equipment and installation of the same. Principal supply is the supply of CCTV Camera. Installation is ancillary to the same.

However, each supply should be independently viewed and studied.

Now, the businesses will need to relook all their potential bundled goods and services. This article deals with the categorisation of supplies as mixed supply and composite supply under GST law.

It is vitally important for businesses to clearly understand composite supply vs mixed supply, their tax implications and accordingly operate to fulfil their desired objective of bundling goods and services.

For all your GST related queries, including registration, compliance and reconciliation enlist the aid of the experts at H&R Block India.

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CA Ankita Mathur
CA Ankita Mathur
Ankita, a Big 4 alumna, is a tax expert at H&R Block (India) with vast experience in managing GST-related business services. An avid traveller, Ankita is a regular contributor to the CAclubindia and loves helping people understand about GST and helping companies be GST compliant.