Taxation · Charge of GST

Composite and Mixed Supply under GST (Section 8) for CA Intermediate

Updated 4 October 2026 · Fact-checked

A composite supply has two or more supplies naturally bundled and supplied together, one of which is the principal supply. It is taxed at the principal supply's rate. A mixed supply is two or more supplies made together for a single price that do not form a composite supply. It is taxed at the highest rate among the supplies.

Understand Composite and Mixed Supply

Many businesses sell more than one item in one deal. GST needs a rule to decide the rate of tax on the whole deal. Section 8 of the CGST Act, 2017 gives that rule. It applies when the supplies are made together and the tax liability on the bundle is to be decided.

A composite supply is a supply made by a taxable person to a recipient. It has two or more taxable supplies of goods or services, or both, or any combination of them. These are naturally bundled and supplied in conjunction with each other in the ordinary course of business. One of them is the principal supply. Example: a hotel room with breakfast, or a goods transport service where the transporter also arranges insurance in transit.

The principal supply is the supply of goods or services which constitutes the predominant element of the composite supply. The other elements are ancillary to it. A composite supply is taxed as the principal supply. So the rate, the classification and the exemption status of the principal supply apply to the whole bundle.

A mixed supply is two or more individual supplies of goods or services, or any combination, made in conjunction with each other for a single price, where the supply does not constitute a composite supply. Example: a gift pack with chocolates, a dry fruit pack and a juice bottle sold for one price. The law says a mixed supply is taxed at the rate of the supply attracting the highest rate of tax. This applies to a mix of different goods, a mix of services, or a mix of goods and services.

The key test is natural bundling. Ask: would a normal buyer expect these items together as part of one service? If yes, it is composite. If the items are not naturally bundled and are only sold together for one price, it is mixed. Section 2(30) defines composite supply and section 2(74) defines mixed supply. A single price is a requirement for a mixed supply.

Key rules to remember

Composite supply tax treatment: Tax on composite supply = tax rate of the principal supply; The whole bundle takes the principal supply's rate, even if an ancillary item has a different rate. Section 8(a).
Mixed supply tax treatment: Tax on mixed supply = tax rate of the supply attracting the highest rate of tax; Applies to the whole bundle. Section 8(b).
Composite supply test: Two or more taxable supplies + naturally bundled + ordinary course of business + one principal supply; Defined in section 2(30). All parts of the test must hold. If the bundle is not natural, test for mixed supply.
Mixed supply test: Two or more individual supplies made in conjunction with each other + single price + not a composite supply; Defined in section 2(74). All parts must hold. A single price alone does not make a bundle mixed; the supply must also not be a composite supply.
Value of the bundle: Taxable value = single transaction value of the bundle; tax = value × rate of principal (or highest-rate) supply; You do not split the price among items when charging tax on the whole bundle.

How to solve Composite and Mixed Supply questions

Use this method for any question that asks you to classify a bundle or compute GST on it.

1List every individual supply in the deal and note whether each is goods or services.
2Check that the supplies are made together by one supplier to one recipient, and note whether they are sold for a single price. A single price is essential for a mixed supply.
3Apply the natural bundling test. Would a typical buyer expect these supplies to go together in the ordinary course of business? Use the facts given, such as the trade practice.
4If naturally bundled, call it a composite supply. Find the principal supply, which is the main reason the buyer pays and which the other items support.
5If not naturally bundled and sold for a single price, call it a mixed supply.
6For composite supply, apply the rate (or exemption) of the principal supply to the whole value. For mixed supply, apply the highest rate among the items to the whole value.
7Compute tax on the total value, as CGST plus SGST, or IGST, as the facts require.
8Write the conclusion in one line: type of supply, rate applied, and tax amount.

Quickest way: Natural bundle or just packed together?

When to use it: Use this for MCQs and for the first two lines of a written answer when you have little time.

Ask one question: does the main item need the other items to be useful or delivered? If yes, composite. If no, mixed.
For composite, name the principal supply in a few words and say the whole bundle takes its rate.
For mixed, list the rates and pick the highest. Do not average them.
In MCQs, eliminate options that average the rates or split the bundle into separate rates.
In written answers, use this format: Provision (section 8), Facts (items and price), Conclusion (type and rate), then the computation.

Common mistakes in Composite and Mixed Supply

Calling every bundle at a single price a mixed supply.
Students notice the single price and skip the natural bundling test.
Fix: Test natural bundling first. A single price does not make a bundle mixed. Hotel room plus breakfast at one price is composite.
Taxing each item in a bundle at its own rate.
Students think of normal item-wise supply and forget section 8 treats the bundle as one supply.
Fix: Apply one rate to the whole value: the principal supply's rate for composite, the highest rate for mixed.
Averaging the rates in a mixed supply.
Averaging feels fair when the rates differ.
Fix: The law says the highest rate applies. Never average.
Picking the highest-rate item as principal supply in a composite supply.
Students carry over the mixed supply rule.
Fix: Choose the principal supply by its predominant nature, not by rate. Its rate may be lower than the ancillary item's rate.
Treating the principal supply as the item with the highest value.
Value looks like the easiest sign of what is predominant.
Fix: Look at the main purpose of the deal and what the buyer is really paying for. Value helps but does not decide it alone.
Writing only the answer without naming the test.
Students rush to the number.
Fix: State the definition, apply it to the facts, then conclude. This earns step marks even if the final figure is off.

Worked examples

Example 1

A supplier sells a gift hamper for ₹2,000 in a single price. It has three items: Item A (assume GST rate 5%), Item B (assume GST rate 12%) and Item C (assume GST rate 18%). These rates are assumed for this question only and do not show the actual rate on any particular product. The items are packed together only for festival sale. Ignore any cess. Find the GST on the hamper.

Show the solution

The items are goods supplied together for one price.
They are not naturally bundled. The items are not needed for each other, and are packed together only for sale. So the supply is not a composite supply.
So this is a mixed supply under section 8(b).
Tax is at the highest rate among the items, which is 18% (Item C).
GST = ₹2,000 × 18% = ₹360.
The tax is ₹360, shown as CGST ₹180 and SGST ₹180 for an intra-State supply, or IGST ₹360 for an inter-State supply.

Answer: Mixed supply. GST is charged at the highest assumed rate of 18% on ₹2,000 = ₹360.

Example 2

A transporter provides goods transport service by road for a total charge of ₹50,000. This includes ₹4,000 for insurance of the goods in transit, which the transporter arranges as part of the service. Treat the transport service as the principal supply taxable at 5% and the insurance service as taxable at 18%. Find the GST on ₹50,000 and state the type of supply.

Show the solution

The supplier provides two services, transport and insurance, together for a single charge.
Insurance in transit is arranged as part of carrying the goods, which is a normal practice. So they are naturally bundled.
This is a composite supply under section 8(a).
The principal supply is the transport service, because the buyer pays mainly to have the goods moved. Insurance is ancillary.
The whole bundle takes the principal supply's rate of 5%.
GST = ₹50,000 × 5% = ₹2,500.
The 18% rate on insurance is not applied separately.

Answer: Composite supply with transport as the principal supply. GST is ₹2,500 at 5% on ₹50,000.

Exam tips

Start every answer with the definition from section 8 and then match each fact to it. This is how step marks are earned.
In MCQs, look for the words naturally bundled and ordinary course of business. They point to composite supply. Words like gift pack or combo packed for sale point to mixed supply.
Always identify the principal supply by name in a composite supply answer. The examiner looks for it.
If the question gives rates for each item, check that you are using the rate of the principal supply for composite and the highest rate for mixed.
Show the tax split into CGST and SGST, or IGST, when the question gives the place of supply.

Practice questions from Charge of GST

Composite and Mixed Supply in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Composite and Mixed Supply: frequently asked questions

What is the difference between composite supply and mixed supply?

A composite supply is a naturally bundled set of supplies made in the ordinary course of business, with one principal supply. A mixed supply is a set of supplies made in conjunction with each other for a single price that does not constitute a composite supply. Composite takes the principal supply's rate, and mixed takes the highest rate.

How do I determine the principal supply in GST?

The principal supply is the predominant element of the composite supply, which is the main reason the recipient buys. The other supplies are ancillary to it. Look at the nature of the deal and what the buyer expects, not just the value or the rate.

Is a single price needed for a composite supply?

The definition of composite supply does not depend on a single price. It depends on natural bundling in the ordinary course of business. A single price is a requirement in the definition of a mixed supply.

Which section of the CGST Act deals with tax liability on composite and mixed supplies?

Section 8 of the CGST Act, 2017 deals with the tax liability on composite and mixed supplies. The definitions of both terms are in section 2 of the Act.