COMPOSITE AND MIXED SUPPLIES –TAX LIABILITY

LAW OF TAXATION - II

Submitted by:

G JANARDHAN

ROLL NO. 2015036

SEMESTER IX

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM

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 ACKNOWLEDGEMENT

I would like to thank my teacher respected MR. BAYOLA KIRAN SIR , for giving me an
opportunity to do this project and for her guidance and support throughout the project. I will
be solely responsible for the errors committed in my project.

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 CHAPTERIZATION:-

I. Introduction
 GST
 Supply Under GST
II. Composite Supply Under GST
III. Mixed Supply Under GST:-
IV. Difference Between Composite And Mixed Supply
V. Tax Liability Of Composite And Mixed Supplies
VI. Certain Clarifications On Composite And Mixed Supply Given By CBEC:-
VII. Conclusion
VIII. Case laws

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 COMPOSITE AND MIXED SUPPLIES –TAX LIABILITY

INTRODUCTION

GST

Goods and Service tax (GST) was introduced in the country w.e.f 01.07.2017. GST brought
many new concepts and definitions in Indirect Taxation and has changed over all scenarios of
Indirect taxes. Some of the new concepts or definitions are as under: Aggregate turnover
,Capital goods ,Composite supply , Council- GST council , Electronic cash ledger , Electronic
credit ledger ,Goods and Services Tax (Compensation to States) Act , Integrated Goods and
Services Tax Act , Mixed supply , Proper officer , Usual place of residence ,Works contract
and many more Each one has deep impact on businesses and need critical analysis to
implement. Any wrong interpretation of the provisions of law may lead to heavy fines,
penalties and litigation.

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.1

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)

'mixed Supply' and 'Composite Supplies' made part of perplexity among partners and
individuals couldn't make out obvious boundary between these two statements of the GST
Act. mixed Supply is characterized under Section 2 (74) of CGST Act, 2017 and it says
"mixed supply" signifies at least two individual supplies of merchandise or benefits, or any
mix thereof, made related to one another by an assessable individual at a solitary cost where
such supply doesn't establish a "composite supply". An explanation is additionally given in
the law which is as under: An supply of a bundle comprising of canned nourishments,

1
"Composite Supply Under GST". 2019. H&R Block | GST. Accessed October 24 2019.
https://www.hrblock.in/gst/composite-supply-gst.

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desserts, chocolates, cakes, dry organic products, circulated air through beverages and natural
product juices when provided at a solitary cost is a mixed supply. Every one of these things
can be provided independently and isn't subject to some other. It will not be a blended stock
if these things are provided independently. Though 'Composite supply' according to Section
2(30) of CGST Act, "composite supply" signifies a supply made by an assessable individual
to a beneficiary comprising of at least two assessable supplies of merchandise or benefits or
both, or any mix thereof, which are normally packaged and provided related to one another in
the conventional course of business, one of which is a principle supply; Illustration: Where
products are stuffed and moved with protection, the stock of merchandise, pressing materials,
transport and protection is a composite supply and supply of products is a principle stock.

Under GST various taxable events like manufacture, sale, rendering of service, purchase,
entry into a territory of state etc. have been included in just one event i.e. supply. The taxable
event in GST is supply of goods or services or both. In case of Intra-state supply the Central
and State governments have simultaneous power to levy CGST and SGST respectively.
However in case of Inter-state supply only Central Government can levy taxes.

The meaning and scope of supply can be understood from the following points:-2

 Supply of goods or services. Supply of anything other than goods or services does not
attract GST

 Supply should be made for a consideration

 Supply should be made in the course or furtherance of business

 Supply should be made by a taxable person

 Supply should be a taxable supply

 Supply should be made within the taxable territory Some of the exceptions to the
requirements of supply are:-

 Any supply of goods or services without consideration is not a supply. In exception of this
there are also some transactions which are treated as supply even done without consideration.
2 Taxconnect.co.in. (2019). [online] Available at: https://www.taxconnect.co.in/wp-
content/uploads/2017/09/Supply-at-a-Glance.pdf [Accessed 25 Oct. 2019].

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 Further, import of services for a consideration, whether or not in the course or furtherance
of business is treated as supply.

 Any transfer of title in goods would be a supply of goods, whereas any transfer of right in
goods without transfer of title would be considered as services.

An assessable occasion under GST is supply of products or administrations

or both. GST will be payable on each supply of products or administrations or both except if
generally absolved. The rates at which GST is payable for singular merchandise or
administrations or both is likewise independently informed Classification of supply
(regardless of whether as products or administrations, the classification of merchandise and
ventures) is fundamental to charge material pace of GST on the specific supply. The use of
rates will represent no issue if the supply is of individual products or administrations, which
is plainly recognizable and the merchandise or administrations are dependent upon a specific
pace of assessment. In any case, not all provisions will be such basic and obviously
recognizable supplies. A portion of the provisions will be a blend of products or mix of
administrations or mix of merchandise and enterprises both. Every individual segment in a
given stock may pull in various pace of expense. The pace of assessment to be collected on
such supplies may represent an issue in regard of order of such supplies. It is therefore, that
the GST Law distinguishes composite supplies and blended supplies and gives conviction in
regard of expense treatment under GST for such supplies.

COMPOSITE SUPPLY UNDER GST

Under GST, a composite supply would mean a stock made by an

assessable individual to a beneficiary comprising of at least two assessable supplies of
merchandise or benefits or both, or any mix thereof, which are normally packaged and
provided related to one another in the standard course of business, one of which is a principle
supply: 3

Composite agreements have customarily presented issues as far as tax collection under help
duty and VAT throughout the years. Regularly the issue must be alluded to Courts for goals
of issues. The confusions were because of the way that the two duties alluded to above were

3 Cleartax.in. (2019). Mixed Supply & Composite Supply under GST. [online] Available at:
https://cleartax.in/s/mixed-composite-supply-gst [Accessed 25 Oct. 2019].

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falling under various tax jurisdictions for example one with Union and the other with the
States separately. Settling this issue was along these lines one of the needs while trying to
present GST (Goods and Services Tax). in GST an exertion has been made to characterize
composite supply where there is a blend of merchandise or benefits or both and to present a
regarding fiction on grouping thereof dependent on saw prevailing part of the equivalent for
exhausting the blend.

Cooking contracts, erection, appointing and establishment agreements and yearly upkeep
agreements and some supply and establishment agreements to give some examples, have all
come into center in such manner. The subject of separating an agreement into one of supply
of products and one for administration has come up frequently in later past in every one of
these cases. One of the patterns saw has been the high number of cases that have been alluded
to Advance Ruling specialists crosswise over States by assessees attributable to the dread of
conceivable generous prosecution costs sometime in the not too distant future in case of
wrong characterization of agreements and complaint by Revenue Authorities subsequently. It
is intriguing to take a gander at these Rulings to comprehend standards pursued despite the
fact that the Rulings in themselves are not official on assessees other than the Applicant. 4

The expression "bundling" on Page 630 of Volume 1 of the said Advanced Law Lexicon has
been characterized to be practice of giving more than one item or administration without a
moment's delay at a comprehensive value, (for example, programming with a PC or life
confirmation with an advance). Taking a gander at both these terms together one can reason
that where merchandise or administrations are to be clubbed or given together considering
their tendency just as natural properties separated from normal exchange practice pursued,
there can emerge a composite stock. Timetable H to Central Goods and Services Tax Act
2017 read with Section (71A)of the and gives rundown of certain provisions which are
regarded to be administrations regardless of whether there is some component of move of
property in merchandise associated with their execution. These are

. Treatment or procedure which is applied to someone else's products for example occupation
work

4 Taxconnect.co.in. (2019). [online] Available at: https://www.taxconnect.co.in/wp-

content/uploads/2017/09/Supply-at-a-Glance.pdf [Accessed 25 Oct. 2019].

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. Works contracts

. Improvement, plan, programming, customisation, adjustment, upgradation, improvement,

usage of data innovation programming. Supply, by way of or as part of any service or in any
other manner whatsoever, of goods, being food or any other article for human consumption or
any drink (other than alcoholic liquor for human consumption), where such supply or service
is for cash, deferred payment or other valuable consideration.5

Composite Supply Section 2(30)6 “composite supply” means 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;

Section 2(90) “principal supply”7 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;

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.

It is evident from the above definition that composite supply is a combination of

principal supply and other supply of taxable goods or services are both. Composite supply
refers to a single supply, but it has more than one component. The supplier has obligation to
supply more than one item. The other components of composite supply can be an integral part
of the supply, incidental to main supply or naturally bundled. The components of supply
which are essential to the supply as a whole is considered as an integral part. If the other
components of supply are integrally attached to the main supply, then the other component

5 RaoT, S. (2019). UNDERSTANDING COMPOSITE SUPPLIES UNDER GST. [online]

Taxmanagementindia.com. Available
https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=8228 [Accessed
24 Oct. 2019].
6
Section 2(30) of Central Goods and Services Tax (CGST) Act, 2017
7
Section 2(90) of Central Goods and Services Tax (CGST) Act, 2017

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will not be considered as a separate supply. As per section 8 of the GST Act, the tax
applicable to principle supply will be applicable to entire supply.

A works agreement and eatery administrations are exemplary instances of composite

supplies, anyway the GST Act distinguishes both as supply of administrations and chargeable
to explicit pace of assessment referenced against such administrations (works agreement and
cafes) In regard of composite supplies (other than the two classes referenced over), the need
to decide the supply as a composite one, will emerge, in order to decide the fitting
characterization. It will be important to decide regarding whether a specific supply is
normally packaged in the standard course of business and what comprises principle stock in
such composite supplies.

The idea of composite supply under GST is indistinguishable from the idea of normally
packaged administrations winning in the current assistance charge system. This idea has been
clarified in the Education Guide gave by CBEC in the year 2012 as under:

"bundled services implies a heap of arrangement of different administrations wherein a

component of arrangement of one help is joined with a component or components of
arrangement of some other assistance or administrations. A case of 'packaged help' would be
air transport administrations given via carriers wherein a component of transportation of
traveler via air is joined with a component of arrangement of providing food administration
ready. Each help includes differential treatment as a way of assurance of estimation of two
administrations to charge administration expense is unique."

The standard is – 'If different components of a packaged help are normally packaged in the
customary course of business, it will be treated as arrangement of a solitary assistance which
gives such group its basic character'

EXAMPLES :

• An inn gives a 4-D/3-N bundle with the office of breakfast. This is a characteristic
packaging of administrations in the customary course of business. The administration of inn
settlement gives the group the fundamental character and would, along these lines, be treated
as administration of giving inn convenience.

• A 5 star inn is reserved for a meeting of 100 delegates on a singular amount bundle with the
accompanying offices:

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  Accommodation for the representatives
 Breakfast for the representatives
 Tea and espresso during meeting
 Access to wellness space for the representatives
 Availability of meeting room
 Business focus

As is obvious, a bundle of administrations is being given, huge numbers of them chargeable

to various compelling paces of assessment. None of the individual constituents can give the
basic character of the administration. Be that as it may, if the administration is portrayed as
show administration, it can catch the whole embodiment of the bundle. In this manner, the
administration might be made a decision as show administration and chargeable to full rate.
Nonetheless, it will be completely reasonable for the lodging to charge separately for the
administrations as long as there is no endeavor to offload the estimation of one help on to
another assistance that is chargeable at a concessional rate.

Regardless of whether the administrations are packaged in the standard course of business,
would rely on the ordinary or incessant practices followed in the zone of business to which
administrations relate. Such ordinary and successive practices embraced in a business can be
found out from a few markers some of which are recorded beneath :

• The view of the customer or the administration collector - If huge number of administration
recipients of such heap of administrations sensibly anticipate that such administrations should
be given as a bundle, at that point such a bundle could be treated as normally packaged in the
common course of business.

• Majority of specialist co-ops in a specific territory of business give comparable heap of

administrations. For instance, heap of cooking ready and transport via air is a pack offered by
a lion's share of carriers.

• The idea of the different administrations in a heap of administrations will likewise help in
deciding if the administrations are packaged in the common course of business. In the event
that the idea of administrations is to such an extent that one of the administrations is the
principle administration and different administrations joined with such assistance are in the
idea of coincidental or subordinate administrations which help in better happiness regarding a
primary assistance. For instance, administration of remain in an inn is frequently joined with

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a help or washing of 3-4 things of dress free of cost every day. Such assistance is an auxiliary
support of the arrangement of inn settlement and the resultant bundle would be treated as
administrations normally packaged in the standard course of business.

• Other illustrative indicators, not determinative but indicative of bundling of servicesin the
ordinary course of business are: - There is a single price or the customer pays the same
amount, no matter how much package they actually receive or use 8

- The elements are normally advertised as a package

- The different elements are not available separately

- The different elements are integral to one overall supply. If one or more is removed, the
nature of the supply would be affected No straight jacket formula can be laid down to
determine whether a service is naturally bundled in the ordinary course of business. Each
case has to be individually examined in the backdrop of several factors some of which are
outlined above. The above principles explained in the light of what constitutes a naturally
bundled service can be gainfully adopted to determine whether a particular supply constitutes
a composite supply under GST and if so what constitutes the principal supply so as to
determine the right classification and rate of tax of such composite supply.

Free supply of medical instruments without consideration linked to supply of reagents

having consideration

In Abbott Healthcare (E) Ltd.,_ [2018 (12) TR 45]9 Authority For Advance Rulings
Kerala), the position of determined therapeutic instruments to inconsequential clients like
emergency clinics, labs and so forth for their utilization with no thought, against an
understanding containing least buy commitment of items like reagents, calibrators, transfers
and so on for a particular period establish composite supply. Here, if the client neglected to
meet its selective buy commitment or its base buy commitment, the candidate reserved the
option to recuperate the deficiency sum from the client. This was a Ruling dependent on
investigation of the genuine goal of the provider on audit of authoritative terms.

After sales services provided in India to end customers

8 Insta.instavat.in. (2019). [online] Available at: http://insta.instavat.in/pdf/E-Flyers.pdf
[Accessed 24 Oct. 2019].
9
Abbott Healthcare Private Limited [2018 (12) TR 45]

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In Toshniwal Brothers (33) Private Limited,_(2018 (m) TMI 597 Authority For Advance
Rulings Karnataka), the Authority held that pre-deals showcasing and advancement
administrations for customer situated outside India and post deals backing and establishment
administrations couldn't be normally packaged as post deal administration is subject to there
being an supply from customer situated outside India to the end purchaser in India. This was
consequently held not to be composite agreement with the pre-deals advancement and related
assistance being viewed as go-between administrations inferable from specialist co-op in
India going about as operator of outside head and taking part in value exchanges for his sake.

Supply of battery with UPS

Where a Uninterrupted Power Supply is provided alongside battery there could be a case for
seeing equivalent to a composite supply as UPS can't work without a battery. Be that as it
may, In Re: M s Switching Avo Electro Power Limited (2018 (g) TMI 1071 Appellate
Authority For Advance Rulings West BengaL). the Appellate Authority has held that when
the battery is provided independently with UPS, the equivalent can't be considered as
composite supply or normally packaged supply. The Appellate Authority was of the view that
when an UPS is provided with worked in batteries so supply of the battery is indivisible from
supply of the UPS, it ought to be treated as a composite supply and as a composite machine.

Regardless of whether a composite machine can be likened with a composite supply is in

itself an inquiry which should be taken up before the Judiciary as we are not managing
arrangement of one thing thusly however a mix of things every one of which might be
independently classifiable exclusively yet introduced all together supply. This point would
expect noteworthiness if we somehow happened to take a gander at assistants to specific
products which are introduced alongside the main thing/merchandise. For instance, mobile
phone and battery charger where the last was viewed as embellishment in Nokia India Pvt.
Ltd versus State of Puan .(2014 (Q) TMI 836 Supreme Court) and not part of composite
products for example phone for characterization. This related to a situation where battery
charger was professed to be a piece of mobile phone.

Supply in the course of works contract execution

In Re: Vihaan Enterprises (Swati Dubey ) (2018 (9)TMI 546) Appellate Authority For
Advance Ruling Maharashtra) , understanding for developing a Sub-station on turnkey

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premise was held to be works agreement and all provisions there under held to be one of
composite supply of works contract which was classifiable as an assistance.

In Fermi Solar Farms Private Limited ( 2018 (9) TMI 1339 Appellate Authority For
Advance Ruling Maharashtra) , contract for setting up and working a sun based power
plant was held to be a composite supply in the idea of works contract which couldn't be part
misleadingly into one for supply and one for administration as the execution plan additionally
included erection, testing and charging of plant. The way that subsequent property was ardent
in nature and until date of definite acknowledgment all danger of misfortune was with
provider and not client, was additionally depended upon to land at the end'

Consultancy services and reimbursements

In re: EGIS India Consulting Engineers (P) Ltd (2018 (8)_ TMI 283 Authority For
Advance Ruling Madhya Pradesh), repayments of expenses on merchandise acquired for
the benefit of beneficiary (viz., PC, work area, cooler, furniture and so on.) for giving venture
the executives consultancy benefits under PMAY plan to State/Urban Local Bodies from the
beneficiary dependent on real cost, was held not to disentitle Applicant to profit of exception
on the concerned help all things considered repayments at real didn't make the agreement a
composite supply contract.

Exam support services and training services

In Re: M/s BC Examinations and English Services India Pvt. Ltd (2018 (7) TMI 1495
Authority For Advance Ruling Haryana) administrations of directing tests covering
sourcing and overseeing test focuses, providing test materials, gathering papers post-test and
overseeing security, overseeing coordinations, office support for money related controls and
bookkeeping forms, printing results, enrolling, preparing and checking invigilators, mentors
and evaluators, and so on were held to be composite supply of administrations as these didn't
have autonomous presence.

In Re: IL and FS Education and Technology Services Ltd (2018 (7) TMI 755 Authority
For Advance Ruling Odisha), contract for supply, establishment, upkeep and charging of
projection framework, intelligent white board, PC equipment, associated extras,
establishment of programming and other unified adornments, site arrangement, support of
hardware and arrangement of PC training administrations for a long time in Govt, and Govt.
supported secondary schools of Odisha in the province of Odisha was held to be composite

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supply of products and ventures not normally yet misleadingly packaged and not contract for
preparing program for any conceivable exception.

MIXED SUPPLY UNDER GST:-

A 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:

MIXED SUPPLY:-

Section 2(74) :10 “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: 1) 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; The mixed supply refers to multiple
supply whose components are either of mixed liability that is they attract different rate of
GST. The individual components are not integral to each other and not dependent on each
other. Therefore, the individual component is considered as a separate supply. But the
supplier charges a single price for all the supplies made. As per section 8 of the GST Act, the
tax applicable to individual supply in a mixed supply attracting highest rate of tax will be
applicable to single price charged for mixed supply.

The following illustration given in the Education Guide of CBEC referred to above can be a
pointer towards a mixed supply of services: -11 “A house is given on rent one floor of which
is to be used as residence and the other for housing a printing press. Such renting for two
different purposes is not naturally bundled in the ordinary course of business. Therefore, if a
single rent deed is executed it will be treated as a service comprising entirely of such service
which attracts highest liability of service tax. In this case renting for use as residence is a

10
Section 2(74) of Central Goods and Services Tax (CGST) Act, 2017
11 Cbic.gov.in. (2019). [online] Available at: http://www.cbic.gov.in/resources//htdocs-
cbec/gst/51_GST_Flyer_Chapter4.pdf;jsessionid=793A1A768ABB1771CF0E6C508708BB1
9 [Accessed 24 Oct. 2019].

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negative list service while renting for non-residence use is chargeable to tax. Since the latter
category attracts highest liability of service tax amongst the two services bundled together,
the entire bundle would be treated as renting of commercial property.”

For example: Price of Shampoo along with Soap (being supply with Shampoo) is Rs 100 and
rate of GST on Shampoo is 5% and on Soap is 18%, therefore, higher rate of Soap @ 18% is
being charged supply of Shampoo along with Soap i.e. Rs 18 (18% of Rs 100). A supply can
be a mixed supply only if it is not a composite supply. The supplies which are not naturally
bundled in the ordinary course of business then it will be treated as mixed supply and it
attracts the highest rate among its constituent’s supplies.12

In order to identify if the particular supply is a mixed supply, the first requisite is to rule out
that the supply is a composite supply. A supply can be a mixed supply only if it is not a
composite supply. As a corollary it can be said that if the transaction consists of supplies not
naturally bundled in the ordinary course of business then it would be a mixed supply. Once
the amenability of the transaction as a composite supply is ruledout, it would be a mixed
supply, classified in terms of supply of goods or services attracting highest rate of tax. The
following illustration given in the Education Guide of CBEC referred above can be a pointer
towards a mixed supply of services: A house is given on rent one floor of which is to be used
as residence and the other for housing a printing press. Such renting for two different
purposes is not naturally bundled in the ordinary course of business. Therefore, if a single
rent deed is executed it will be treated as a service comprising entirely of such service which
attracts highest liability of service tax. In this case, renting for use as residence is a negative
list service while renting for non-residence use is chargeable to tax. Since the latter category
attracts highest liability of service tax amongst the two services bundled together, the entire
bundle would be treated as renting of commercial property.

‘Mixed Supply’is assessable supply under GST Act. According to segment

8(b) of CGST Act, 2017, a blended supply containing at least two supplies will be treated as a
supply of that specific stock which pulls in the most elevated pace of duty. Means on the off

12 Zoho.com. (2019). GST | Composite Supply & Mixed Supply | Zoho Finance. [online]
Available at: https://www.zoho.com/in/books/gst/what-is-mixed-composite-supply-under-
gst.html [Accessed 24 Oct. 2019].

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chance that you are purchasing at least two things in single cost or bundle then the things
which pulls in most elevated pace of duty, that pace of assessment will be charged for every
one of the things. Give us a chance to comprehend it with models: In said basket the rate of
GST as applicable on individual items is as under: Items Qty Amount GST Rate Chocolates -
100 gms 200/- 18% Biscuits - 300 gms 100/- 18% Juices - 250 ml 50/- 12% Soft drinks - 200
ml 15/- 28% Dry fruits - 300 gms 300/- 5% Total 665/- (Rates are subject to latest
notifications) In above said example highest rate of GST is applicable on Soft drinks though
has minimum monetary value in total pack of Rs. 665/-. So as per the provisions of GST Act,
the whole basket shall be charged with GST @ 28%.

In detail

On the event of Deepawali and different celebrations, we purchase presents for our
companions and family members or staff/workers where in we give them blend of these
things. It is extremely basic on Deepawali that we purchase a containers comprising of things
like chocolates, bread rolls, squeezes and dry organic products. Every one of these things
generally can likewise be bought/sold and has no pertinence of purchasing in a solitary
bundle. In any case, on Deepawali we do as such. According to arrangements of GST Act, it
goes under the meaning of 'mixed supply'. 'Get one get one' offers are best case of blended
supplies. 13

Correspondingly, we purchase or sell things in Cookware/Kitchenware run, porcelain, glass

things, show pieces and so on in single bundle or for single cost.

We additionally purchase or sell Candles, Earthen Pots, Earthen heavenly, Earthen

ornamental pieces and so forth in single bundle or for single cost.

In Electronics things we purchase or sell Television, Home Theater, Refrigerator, Washing

machine in one of the plans where in sound frameworks, broiler, iron and advanced camera
are provided either as unconditional present or for single cost. This is additionally an instance
of mixed supply in light of the fact that these things can generally be sold or obtained.
However, on the event of celebrations these are being sold in single cost or bundle which
comprises a 'blended supply' under GST.

13 Icmai.in. (2019). [online] Available at:

http://icmai.in/TaxationPortal/upload/IDT/Article_GST/76.pdf [Accessed 25 Oct. 2019].

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In the event of Mobile telephones portions, we purchase or sell Mobile telephones, ear
telephones, earphones, battery reinforcement and so on in single value which additionally
comprise 'blended stock' under GST.

So there are different reasons when we purchase or sell such things in blend of at least two. It
is critical to know their expenses and status under GST, so that at whatever point we do such
exchanges we should cover real regulatory expense and be charge consistent.

COMPOSITE SUPPLY 14 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 Tax liability shall be the rate applicable to the
supply 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 Example: A Diwali gift pack comprising of
mobile phones. chocolates and sweets.
WCT, Restaurant services.

Determination of tax liability of composite and mixed supplies: 15 The assessment risk on
a composite or a mixed supply will be resolved in the accompanying way: (a) A composite
supply including at least two supplies, one of which is a principal supply , will be treated as
asupply of such principle supply (b) A mixed supply containing at least two supplies will be
treated as an supply of that specific supply which pulls in the most noteworthy pace of tax.

14 "Difference Between Mixed Supply & Composite Supply In GST | Tally Solutions".
2019. Tally. Accessed October 24 2019. https://tallysolutions.com/gst/gst-mixed-supply/.
15 GST?, W. (2019). What is Composite Supply Under GST? - QuickBooks. [online]
QuickBooks. Available at: https://quickbooks.intuit.com/in/resources/gst-center/what-is-
composite-supply-under-gst/ [Accessed 24 Oct. 2019].

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Tax Liability -Section 8 - The tax liability on a composite or a mixed supply shall be
determined in the following manner, namely :— (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; 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.

Time of supply in case of composite supply :16

On the off chance that the composite supply includes supply of administrations as principle
supply, such composite supply would qualify as supply of administrations and as needs be the
arrangements identifying with time of supply of administrations would be pertinent. On the
other hand, if composite supply includes supply of products as principle supply, such
composite supply would qualify as supply of merchandise and as needs be, the arrangements
identifying with time of supply of merchandise would be pertinent.

Time of supply in case of mixed supplies :

The mixed supply, including supply of an assistance at risk to impose at higher rates than
some other constituent supplies, would qualify as supply of administrations and in like
manner the arrangements identifying with time of supply of administrations would be
relevant. Then again, the mixed supply, including supply of products at risk to assess at
higher rates than some other constituent supplies, would qualify as supply of merchandise
and in like manner the arrangements identifying with time of supply of administrations would
be material.

Certain clarifications on composite and mixed supply given by CBEC:-17

The printing business in India specifically faces an issue in deciding if the idea
of supply gave is that of merchandise or administrations and whether in the event that
specific agreements include both supply of products and enterprises, regardless of whether

16 Insta.instavat.in. (2019). [online] Available at: http://insta.instavat.in/pdf/E-Flyers.pdf

[Accessed 24 Oct. 2019].
17 Cbic.gov.in. (2019). [online] Available at: http://www.cbic.gov.in/resources//htdocs-
cbec/gst/51_GST_Flyer_Chapter4.pdf;jsessionid=793A1A768ABB1771CF0E6C508708BB1
9 [Accessed 24 Oct. 2019].

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the equivalent would comprise an supply of products or administrations or in the event that it
would be a composite stock and on the off chance that it is, at that point what might establish
the principle stock. It is to be noticed that if there should arise an occurrence of composite
supplies, taxability is controlled by the principle supply. To address worries of the printing
business, CBEC has turned out with Circular no.11/11/2017-GST dated 20.10.2017, where in
it is explained as under: "It is explained that supply of books, handouts, pamphlets,
envelopes, yearly reports, flyers, containers, boxes and so on printed with logo, plan, name,
address or different substance provided by the beneficiary of such printed products, are
composite supplies and the inquiry, regardless of whether such supplies establish supply of
merchandise or administrations would be resolved based on what comprises the principle
supply. On account of printing of books, leaflets, pamphlets, yearly reports, and such, where
just substance is provided by the distributer or the individual who possesses the utilization
rights to the impalpable information sources while the physical data sources including paper
utilized for printing have a place with the printer, supply of printing [of the substance
provided by the beneficiary of supply] is the principle supply and in this way such supplies
would comprise supply of administration falling under heading 48 or 49 of the plan of
arrangement of administrations supply] is ancillary to the principal supply of goods and
therefore such supplies would constitute supply of goods falling under respective headings of
Chapter 48 or 49 of the Customs Tariff.

CASES:

1) Giriraj Renewables (P.) Ltd., In re [2018] 97 taxmann.com 510/70 GST 246

(AAAR Karnataka) 18

In case of an appellant contractor engaged in business of supply and end to end setting up of
Solar Power Generating Systems, supply made by sub-contractor to appellant are independent
supplies if supply by subcontractor to the appellant is of goods Which can be termed as
‘parts’ of the Solar Power Generating System, then rate applicable will be 5 per cent in terms
of Sl. No. 234 of Notification No. 1/ 2017-Integrated Tax (Rate), dated 28-6-2017.

18
Giriraj Renewables (P.) Ltd., In re [2018] 97 taxmann.com 510/70 GST 246 (AAAR
Karnataka)

Page | 19
However, if supply by sub-contractor to the appellant is Composite supply, then tax liability
will be determined in terms of section 8, wherein rate applicable to dominant nature of supply
will prevail.

2) Torrent Power Ltd. V. Union of India [2019] 101 taxmann.com 303 (GUJ) 19

The petitioner company was, inter alia, engaged in the business of generation transmission/
distribution of electricity in the State of Gujarat and was duly register6d under the Goods and
Services of the Act.

It was the case Of petitioners that prior to the introduction of the negative list regime for
service tax under the Finance Act, 1994, the petitioners as well as other
transmission/distribution companies believed that Since there was no specific clause in the
charging provision of the Finance Act requiring payment of service tax, no service tax was
required to be paid in respect of any amount collected from consumers relating to
transmission and distribution 0f electricity. The Government of India issued Notification No.
11/2010-Service Tax on 27-2-2010, exempting taxable service provided to any person by any
other person for transmission of electricity. Another Notification No. 32/ 2010-Service Tax
was issued on 22-6-2010, exempting taxable service provided to any person by a distribution
licensee/ franchisee for distribution of electricity. ,

The related/ancillary services to transmission and distribution and distribution of electricity

are exempt from payment of service tax. The dispute, therefore, relates to the period of the
negative list regime and the CGST/ SGST regime. With effect from 1-7-2012, section 65B of
the Finance Act, 1994 came to be amended and service tax became leviable on all services,
other than those services specified in the negative list. Admittedly, transmission and
distribution of electricity by an electricity transmission or distribution utility, finds place in
the negative List and, is therefore, not exigible to service tax.

The Government of India issued and impugned Circular, dated 1-3-2018, clarifying that the
service by way of transmission or distribution by an electricity transmission or distribution
utility is exempt from GST under Notification No. 12/ 2017-CT(R), Sl. No. 25. The other
services such as (i) application fee for releasing connection of electricity; (ii)rental charges
against metering equipment; (iii) testing fees for meters/transformers, capacitors, eta; (IV)
19
Torrent Power Ltd. V. Union of India [2019] 101 taxmann.com 303 (GUJ)

Page | 20
labour charges from customers and shifting of meters or shifting of service lines; and (v)
charges for duplicate bill; provided by DISCOMS to consumers are taxable.

Subsequently, the Directorate General of Goods and Service Tax Intelligence issued
summons to the petitioners on 28-3-2018 and tax was proposed to be levied under the
Finance Act as well as under the GST Acts on such charges.

Held that as per the circular, dated 7-12-2010, the reason for saying that supply of electricity
meters for hire to consumers is covered by the exemption notification is that such service is
an essential activity having direct and close nexus with transmission and distribution of
electricity. This circular only provides an interpretation of when a service would stand
included in another service, namely, when such service is an essential activity having direct
and close nexus with the exempted activity. Therefore, the fact that the exemption
notifications came to be rescinded has no relevance inasmuch as all that the circular clarifies
is what according to the Government of India would stand included in another service. Such
interpretation would not change merely because such exemption is now granted under some
other provision.

The meaning of ‘transmission and distribution of electricity’ does not change either for the
negative list regime or the GST regime. Accordingly, the services which stood included
within the ambit of transmission and distribution of electricity during the pre-negative list
regime cannot now be sought be excluded by merely issuing a clarificatory circular, that too,
with retrospective effect. By the clarificatory circular, the respondents seek to give a different
interpretation of the very same services as against the clarification issued for the pre-negative
list regime.

From the very manner in which the respondents have treated the services related to
transmission and distribution of electricity during the pre-negative list regime, the
related/ancillary services would stand covered by the exemption granted to transmission and
distribution of electricity by virtue of inclusion of such services in the list of negative services
under section 66D (k) of the Finance Act as well as by virtue of exemption notification issued
under the CGST Act.

Any line which 13 used for carrying electricity for any purpose as well as any apparatus
connected to any such line for the purpose of carrying electricity is mandatorily required to
be provided to the consumer by the licensee. The term ‘electrical plant’ takes within its sweep

Page | 21
any plant, equipment, apparatus or appliance or any part thereof used for, or connected with,
the generation, transmission, distribution or supply of electricity, except for electric meter
and any electrical equipment, apparatus or appliance under the control of a consumer. Sub-
section (2) of section 43 of the Electricity Act casts a duty upon the licensee to provide, if
required, electric plant or electric line for giving electric supply to the premises. Therefore,
providing electric line and electric plant are elements of service which are naturally bundled
in the ordinary course of business, with the single service of transmission and distribution of
electricity which gives the bundle its essential character. The only related service which does
not fall within the ambit of the definitions of electric line and electric plant is the meter used
for ascertaining the quantity of electricity supplied to any premises. However, insofar as
installation of electricity meter and hire charges collected in respect of electricity meters are
concerned, by the circular dated 7-12-2010 the Government of India has clarified that supply
of electricity meters for hire to the consumers is an essential activity having direct and close
nexus with transmission and distribution of electricity, and, therefore, is covered by the
exemption for transmission and distribution of electricity extended under the relevant
notifications.

Therefore, all the services related to transmission and distribution of electricity are naturally
bundled in the ordinary course of business of the petitioner and are required to be treated as
provision of the single service of transmission and distribution of electricity which gives the
bundle its essential character.

The term ‘taxability' means liability to taxation. Thus, the term taxability would take within
its sweep not being taxable also in as much as liability to taxation would also mean not being
liable to any tax. Thus, the liability to tax of a bundled service has to be determined in the
manner provided under sub-section (3) of section 66F 0f the Finance Act. If the services are
naturally bundled in the ordinary course of business, the bundle of services shall be treated as
provision of the single service which gives the bundle its essential character and where the
services are not naturally bundled in the ordinary course of business, the same is required to
be treated as provision of the single service which results in highest liability of service tax.
Accordingly, where the services are naturally bundled in the ordinary course of business and
the single service which gives such bundle its essential character is exempt from tax, the
entire bundle will have to be treated as provision of such single service.

Page | 22
In respect of the period falling under the negative list regime, the services in question would
fall within the ambit of bundled services as contemplated under sub-section (3) of section 66F
of the Act, and would have to be treated in the same manner as the service which gives the
bundle its essential character, namely, transmission and distribution of electricity and, would
therefore, be exempt from payment of service tax.

The services provided by the petitioner are in the nature of composite supply and therefore, in
view of the provisions of clause (a) of section 8 of the CGST Act, the tax liability thereof has
to be determined by treating such composite same as a supply of the principal supply of
transmission and distribution of electricity. Consequently, if the principal supply of
transmission and distribution of electricity is exempt from levy of service tax, the tax liability
of the related services shall be determined accordingly. For the foregoing reasons. the petition
succeeds and is, accordingly, allowed to the following extent:

Paragraph 4(1) of the impugned Circular No. 34/ 8 / 2018-GST, dated 1-3~ 2018 is hereby
struck down as being ultra vires the provisions of section 8 of the Central Goods and Services
Tax Act, 2017 as well as Notification No. 12/2017-CT (R) serial No. 25. The impugned
summons dated 28-3-2018 is hereby set aside to the extent the petitioners are called upon to
produce the documents listed at serial No. 5 of the annexure thereto.

3) IAC Electricals (P.) Ltd., In re [2018] 93 taxmann.com 476/68 GST 392 (AAR
West Bengal) 20

The applicant had entered into two separate contracts with contractee-one for supply of
materials at ex-factory price and other for supply of allied services like transportation,
insurance, loading/ unloading, etc., for delivery of materials at contractee’s site. It was not a
goods transport agency. It had arranged various other persons for supply and delivery of
material at contractee’s site. It made application before the Authority for Advance Ruling
seeking ruling regarding taxability of services supplied by it.

Held that it is immediately apparent that the first contract cannot be executed independent of
the second contract. There cannot be any ‘supply of goods’ without a place of supply. As the

20
IAC Electricals (P.) Ltd., In re [2018] 93 taxmann.com 476/68 GST 392 (AAR West
Bengal)

Page | 23
goods to be supplied under the first contract involve movement and/ or installation at the site,
the place of supply shall be the location of the goods at the time when movement of the goods
terminates for delivery to the recipient or moved to the site for assembly or installation. The
first contract, however, does not include the provision and cost of such transportation and
delivery. It, therefore, does not amount to a contract for supply of goods unless tied up with
the second contract. In other words, the first contract has no leg to stand on unless supported
by the second contract. It is no contract at all unless tied up with the second contract. Thus,
the services of transportation, in-transit insurance and loading/ unloading, being ancillary to
principal supply of goods, would be liable for taxation under section 8(a) of the Central GST
Act.

CONCLUSIONS

Given the renewed categorization of supplies as mixed supply and composite supply under
GST, businesses will need to re-look all their potential bundled goods and services. It is
important for businesses to clearly understand composite supply vs. mixed supply, their tax
implications and accordingly operate to fulfill the desired objective of bundling goods and
services. Each transaction we come across needs to be examined from the perspective of
composite and mixed supplies. More often than not, we may realize that what seemed to be a
supply of particular goods or particular services is actually a bundled supply. For composite
and mixed supply we can say that if supplies are not naturally bundled in the ordinary course
of business then it would be a mixed supply but if it is naturally bundled then it would be
composite supply.

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