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Mixed Supply And Composite Supply Under GST

GST has a new notion called Mixed Supply and Composite Supply that applies to all supplies made in conjunction, regardless of whether they are connected. Composite or blended supplies of two or more items or services are acceptable.

What do you mean by composite supply with an example?

In the context of business, a composite supply consists of two or more items or services, one of which is a significant supply and which are naturally combined and supplied together. This indicates that the products are typically sold as sets. No independent supply of the items is possible.

Let’s use the following example to better understand this:

A dealer offers four complimentary maintenance services together with the purchase of a new car, in addition to registration, insurance, a toolbox, and a first aid kit. This is a composite supply because without a car; it is impossible to provide free maintenance services, registration, or insurance (which is the principal supply).

What are the features of composite supply?

Any source that possesses the following characteristics qualifies as a composite supply:

  • There should be at least two supplies in a supply. Both should be considered taxable supplies under the GST.
  • Goods, services, or a combination of both can be supplied.
  • Conjunctive to each other or made simultaneously, the combination of materials should be made.
  • Natural bundling of supplies is advised.
  • In the regular course of business, two or more supplies may be bundled. One of the assembled supplies should serve as the main supply.

What is a Single Composite Supply?

A supply that consists of two or more naturally bundled and supplied supplies of commodities or services, or a combination of goods and services, is referred to as a single composite supply. The supplies that should be treated as a single composite supply and the conditions that must be met are made clear by the UAE VAT Executive Regulations.

For instance, All business class travellers on foreign flights are given complimentary access to a lounge. The lounge access will be classified as a single composite supply subject to VAT at 0% because it is an incidental component of the supply of the international flight.

What is Mixed Supply?

A mixed supply comprises two or more distinct goods or services that are marketed as a package deal but may also be purchased separately.

When multiple items or services are involved, the one with the highest GST rate is considered the primary supply (whether or not it is the main part of the bundle). The mixed supply is subject to tax at the principal supply’s GST rate.

Difference between composite supply and mixed supply

Specification Composite Supply Mixed supply
Key item Principal item Product with the highest tax rate
Appropriate tax rate Tax rate for the main item Most valuable item in terms of tax rate