In my last article, I had written that you should see the latest notifications at least a month before the exam. Please practice on MCQ’s given in study material as well as MCQ’s from other books as this will constitute a major part of your GST section.
In this section, we are covering Composite Supply & Mixed Supply, Charge of Tax, Interstate & Intrastate supplies with supplies within and outside Territorial Waters.
Composite Supply & Mixed Supply
This is a new concept under GST. Supplies which are in a combination of good or combination of services or combination of both goods & services, the rate of tax applicable may be different for each goods or services. To find out what rate to be charged on such supplies, it has been clearly specified as what is to be treated as composite supply and what is to be treated as mixed supply and tax charged accordingly. To determine supply is composite or mixed supply, we have to understand the concept of naturally bundled or not naturally bundled.
When goods or services or both are naturally bundled (in the ordinary course of business) and are supplied in conjunction of each other, the principal supply shall be treated as supply and the whole lot of composite supply will be charged at a rate of principal supply.
Let us take an example of a package of stay in the hotel with other free services such as laundry, food etc, in such case stay is the principal supply and rate for will be charged on all supplies applicable to stay.
Take another example of buying an electronic item where you get a warranty and free service, so the principal supply is an electronic item and others are ancillary supplies.
Where the supply of two or more individual supplies of goods or services or a combination thereof, for a single price and the supplies are independent of each other and not naturally bundled. In this case, the supply that attracts the highest rate of tax shall be applicable to all the goods.
Let us take an example: Diwali gift hamper consisting of sweets, aerated drinks, canned fruits etc when supplied for a single price, the rate of tax will liable for all the products, the supply that attracts the highest rate of tax. So in this case, if aerated drink attracts the highest rate than all products will be charged at that rate.
Charge of Tax
It is very important to know whether the supply is interstate or intrastate, the tax will be charged accordingly. We all know for Intra State we will charge CGST & SGST/UTGST and for Inter-State we will charge IGST.
Tax will be charged at the rates notified by the Govt. on the recommendations of the GST Council.
Interstate supply means supply in two different States or Union Territories.
When the supply is outside India it shall be treated as Inter-State Supply, and when the supply is imported into India then also it will be treated as Inter-State Supply, supply to SEZ & SEZ Developer is also treated as Inter-State Supply (section 7 IGST Act).
Where both not being intrastate or interstate or not covered anywhere else shall also be treated as interstate.
We should also understand the meaning of supply within and outside India for which is important for us to know what is a territory of India.
India means territory as referred in Article 1 of the Constitution. It includes its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone and also the airspace above its territory and territorial waters. Territorial Waters upto 12 NM from baseline. Exclusive economic zone upto 200 NM from baseline. High seas after 200 NM.
Intrastate supply means, supply within same States or Union Territories except to SEZ or SEZ developer.
Tax payable by E-commerce Operator ECO. All provisions of CGST Act shall apply to ECO. ECO shall deduct 1% from the payment made to the supplier and deposit the same with Govt.
In next article, we will cover exempt supply, zero-rated supply.
Disclaimer: All views are personal and shall not be taken as opinion or statement of Law.
Source: CGST & IGST Act
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