3 Types of Supply Defined under Revised Model GST Law -be careful to avoid Litigation

By | December 18, 2016
(Last Updated On: December 18, 2016)

Supply Concept under Revised Model GST Law

  1. Principal supply
  2. composite supply
  3. Mixed supply

 “ Principal supply” 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 and does not constitute, for the recipient an aim in itself, but a means for better enjoyment of the principal supply; [ Section 2(78) of Revised Model GST Law ]

Illustration There is no example given in the revised GST Law for principal supply. However, principal supply will be that supply which is predominant over other supplies. Say for example free wifi services provided during stay in hotel. In this case, the predominant supply is accommodation services and wifi services are provided only for better enjoyment of the principal supply of service. This is same concept of bundled service which is applicable in current service tax regime.

 “composite supply” means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, 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;

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 the principal supply. [Section 2(27) ]

 “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 drink 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. [ Section 2(66) of Revised Model GST Law ]

GST Tax Liability in case of composite or a mixed supply [Section 3(5) of Revised Model GST Law ]

The tax liability on a composite or a mixed supply shall be determined in the following manner —

(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.

(b) a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.

Litigation Issue   : -The above provisions will definitely create disputes and litigation as whether the supply is composite or mixed will be dependent on facts and circumstances of a particular case. The revenue department may consider a supply as composite or mixed according to the highest tax criteria. Therefore one needs to be very careful to decide whether Supply is Composite Supply or Mixed Supply  under Revised Model GST Law


[Editor Note : New The Draft Model GST Law, Draft IGST Law and Draft Compensation Law which would be considered by the GST Council for approval are placed in the public domain for information of trade, industry and other stake holders. on 25.11.2016 :-

Draft Model GST Law,

Draft IGST Law and

Draft Compensation Law ]

Earlier, the Draft Model GST Law was put in public domain in the month of June, 2016 for comments  Download:  Old Draft Model GST Law -june 2016 ]

Taxable person- Section 10 of New Draft Model GST Law

GST compliance rating- Section 138 of New Draft Model GST Law

Anti-profiteering Measure – Section 163 of New Draft Model GST Law

Schedule V of New Draft Model GST Law -Person Liable to be Registered

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