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In the Erstwhile law there were confusions to classify, in few cases, whether an activity is sale of goods or service where the services are bundled with goods in an activity. Taxes under the state laws as well as central laws were levied on the same transaction, where the customer ended up paying both the taxes. In case of few sales, there were ambiguities whether to classify as goods or service, which led to confusion among the business class to determine the classification.

Under the GST law, where the supplies are bundled with two or more supply of goods or services or a combination of both are classified either as the following depending on the nature of supply:-

a. Composite supply
b. Mixed supply

Composite Supply

As per Section 2(30) of the CGST Act, 2017 supply of goods or services or both shall be termed as a composite supply if the following elements are present:-

• The supplies involved two or more taxable supplies of goods or services or both.
• The supplies shall include it involves a two or more goods or services or a combination of goods and services.
• They are naturally bundled.
• The supplies are made in the ordinary course of business
• One of the supplies should be a principal supply

Principal supply means the predominant element in the composite supply of goods or services and to which an ancillary supply forms part. The ancillary supply has to be depended on the principal supply. However, if such ancillary supply can be made on a standalone basis, then such supply shall not constitute as a composite supply.

Rate of tax for Composite Supply
Tax rate applicable to the principal supply shall be applicable to a composite supply.

Illustration for Composite Supply

a. A dealer who supplies a car also supplies registration, insurance and free maintenance services for certain period along with the supply of car. This is a composite supply, because vehicle insurance, registration and free maintenance services cannot be supplied without the vehicle. Here, supply of car is predominant in nature and will classify as a principal supply and supply of registration, insurance and free maintenance services are dependent supplies.

Hence, rate of tax as applicable to the car would apply to registration, insurance and free maintenance services.

b. An ice cream supplier supplies spoon along with the ice cream. Here, the principal supply is supply of ice cream and ancillary supply is the supply of spoon.The rate of tax as applicable to ice cream would apply to the spoon as well.

Mixed Supply

Mixed supply means a combination of two or more goods or services or combination of goods and services which are made together for a single price. These supplies are not naturally bundled and can be supplied individually. However, these may be supplied in the ordinary course of business. Each of these can be supplied separately and are not dependent on each other.

If a bundled supply of goods or services or a combination of both cannot be classified as a composite supply, then such supply would be termed as mixed supply.

Rate of tax for Mixed Supply
The highest GST rate applicable to any of the good or service in the bundle shall be applicable to the entire supply.

Illustration for Mixed Supply

a. Supply of a registration and insurance services along with car is a composite supply. However, if an air conditioner is supplied with the car then the same shall constitute as a mixed supply since air conditioner and car can be supplied independently and are not naturally bundled. The highest rate of tax would be applicable to both goods.

b. Supply of sweet boxes, chocolates, ice creams, juices and crackers bundled together at the time of Diwali would constitute as a mixed supply. Each of the goods can be sold independently and are not dependent on one other. Hence the highest rate of tax applicable to the aforesaid goods shall apply to the entire supply.

Difference between Composite supply and Mixed supply

Composite and mixed supplies may look similar in terms of single price, bundled in nature. However, there exists certain difference as explained below:-

a. Principal supply:- In a composite supply, one of the supply would constitute as a main supply i.e., the principal supply. However in case of a mixed supply, no supply is principal in nature.

b. Supplied individually:- In case of a composite supply there is no point in supplying the ancillary parts separately without the supply of main product. Ancillary parts are dependent on the principal supply. In case of mixed supply, each part can be sold independently.

There arises a confusion when the aforesaid concepts when read with the Honorable Supreme Court (SC) judgment as per the erstwhile law in the case of State of Punjab &Ors Versus Nokia India Pvt. Ltd.,2014-TIOL-100-SC-VAT, where the SC held that

"We find that the Assessing Authority, Appellate Authority and the Tribunal rightly held the mobile /cell phone charger is an accessory to cell phone and is not a part of the cell phone. We further hold that the battery charger cannot be a composite part of the cell phone but is an composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger is a part of the cell phone."

Accordingly, the battery charger which is sold along with the mobile phone should be considered as an accessory and the rate of tax applicable to the charger has to levied. This is due to the fact that the battery charger can be sold separately and not dependent on the sale of mobile.

If the same judgment is applied under the GST laws, which states if a composite part of a supply which is capable of being sold independently, then such part has to be charged at the rate applicable to the part and not the principal product. In such a case, the classification of a supply whether as a composite supply or mixed supply or separate supplies will be a difficult task. If the same has not been addressed then this may lead to litigations.


In classifying the supplies as composite supply or a mixed supply, the businesses has to be relooked in order to verify whether such a supply is either of these. The difference between the both has to be clearly ascertained before classifying any supply as a mixed supply or a composite supply.

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Category GST, Other Articles by - CA SUDHINDRA D S