Under the GST regime, a supply can partake the character of a mixed supply or composite supply. The CGST Act, 2017 prescribes separate provisions for determination of tax liability for composite supply and mixed supply. Therefore, determination of the nature of supply (whether it is a composite supply or a mixed supply) is important so as to levy the correct rate of tax.
What is a Mixed Supply
The term ‘mixed supply’ has been defined under section 2(74) of the CGST Act, 2017 as below: –
‘(74) “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 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;’
On reading of the aforesaid definition, it emerges that following conditions should be met so as to regard a supply as a ‘mixed supply’-
- There should be two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other.
- The said supply should be for a single price.
- Such supply should not constitute a composite supply.
It is pertinent to note that all the aforesaid conditions must be met cumulatively by any supply to qualify as a mixed supply. Composite supply and mixed supply are mutually exclusive. The conditions as defined under section 2(30) of the CGST Act, 2017 in respect of composite supply must not be present in a supply in order to characterised as ‘mixed supply’. Accordingly, if a supply qualifies to be a composite supply then it can not be a mixed supply. Under mixed supply, the individual supplies are not naturally bundled and are not dependent on each other.
Taxability of Mixed Supply
Section 8(b) of the CGST Act, 2017 deals with the taxability of mixed supply. Relevant portion of the same has been reproduced below: –
“8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-
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(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.“
In terms of the above provisions, where two or more supplies are made for a single price in conjunction with each other and can be characterized as a mixed supply, then such supply should be treated as a supply of such goods or services which attracts the highest rate of tax. As such, the entire price received would be liable to be taxed at the highest rate applicable to the goods or services in the bundle.
Example
A person supplies a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices for a single price. In this case, all the items in the package are supplied in conjunction with each other and for a single price. However, each of these items can be supplied separately and is not dependent on the other items in the bundle. They are not naturally bundled in the ordinary course of business. As such, this supply does not qualify to be a composite supply and obtains the characteristics of a mixed supply. Hence, taxability of this supply would be determined as per the provisions stipulated in sub- section (b) of section 8 of the CGST Act, 2017. Accordingly, this supply must be treated as a supply of such goods which attracts the highest rate of tax. If tax rate applicable for aerated drinks is 28% and tax rate for all the other products in the bundle is 18%, then the entire package would attract 28% tax.
Conclusion
Mixed supplies are two or more individual supplies of goods or services or any combination thereof, made in conjunction with each other for a single price which are not composite supplies and are not naturally bundled. Mixed supplies are liable to be taxed at the highest rate applicable to the goods or services in the bundle.