Goods and Services Tax (GST) and Corporate Tax Planning · Supply under GST

Composite and Mixed Supply under GST: Principal Supply and Tax Rate

Updated 11 October 2026 · Fact-checked

A composite supply is a bundle of supplies naturally sold together, taxed as its principal supply. A mixed supply is a bundle of supplies sold together for one price without being naturally bundled, taxed at the rate of the supply attracting the highest rate. Section 8 of the CGST Act sets both rules.

Understand Composite and Mixed Supply

Businesses often sell more than one item in a single deal. GST needs one clear answer on what rate applies to such a deal. Section 8 of the CGST Act gives that answer. It splits such deals into two types: composite supply and mixed supply.

A composite supply has two or more supplies that go together in the ordinary course of business, and one of them is the principal supply. The principal supply is the main one; the others are ancillary and help the customer enjoy it. Section 8(a) says the whole deal is treated as a supply of the principal supply. So the rate, and the goods or services classification, of the principal supply applies to the whole bundle.

A mixed supply has two or more individual supplies made together for a single price, but they are not naturally bundled and there is no principal supply. A gift pack of unrelated items is the usual picture. Section 8(b) says the whole is treated as the particular supply that attracts the highest rate of tax.

The Act text supplied here gives the tax rule in section 8. The definitions of composite supply and mixed supply sit in section 2 of the CGST Act, and you should remember their key conditions: for composite supply, the supplies are naturally bundled in the ordinary course of business and made by a taxable person to a recipient; for mixed supply, the supplies are made together for a single price and are not a composite supply. Both apply to IGST too: section 20 of the IGST Act applies the CGST provisions on composite and mixed supply, with the necessary changes, to integrated tax.

The test is not what the seller calls the deal. It is the facts: do the items naturally go together, and is there one dominant item? Decide that first, then apply the rate rule.

Key rules to remember

Composite supply rule: Tax on composite supply = tax treatment of the principal supply; Section 8(a) CGST Act. The whole bundle takes the rate and nature of the principal supply.
Mixed supply rule: Tax on mixed supply = tax treatment of the supply attracting the highest rate; Section 8(b) CGST Act. Compare the rates of all items in the bundle and apply the highest to the whole.
Test for composite supply: Two or more supplies + naturally bundled in ordinary course + one principal supply; If all three hold, it is composite. Otherwise check for mixed supply.
Test for mixed supply: Two or more supplies + single price + not naturally bundled (not composite); No principal supply is needed. The highest rate decides.
Application to IGST: Section 20, IGST Act: CGST provisions on composite and mixed supply apply mutatis mutandis to integrated tax; The same classification rule applies to inter-State supplies.

How to solve Composite and Mixed Supply questions

Use this order for any case-based question on composite or mixed supply. Write the provision, analyse the facts, then conclude.

1List every individual supply in the deal and the price charged. Note if one price covers all.
2Ask whether the supplies are naturally bundled in the ordinary course of business. Use trade practice and customer expectation, not the seller's choice.
3If they are naturally bundled, identify the principal supply: the one that is the main purpose and the others only help it.
4State section 8(a): treat the whole as the principal supply and apply its rate.
5If they are not naturally bundled but sold together for a single price, call it a mixed supply and state section 8(b).
6List the rate for each supply and pick the highest. Apply it to the whole value.
7Compute tax on the total value and state the conclusion in one line.

Quickest way: Natural bundle test, then rate rule

When to use it: Use when the question gives a short fact pattern and asks for the rate or the nature of the supply.

Ask: would a normal buyer expect these items together? If yes, composite; find the main item and use its rate.
If no, and the price is single, mixed; scan all rates and take the highest.
If the items are billed separately and priced separately, check if they are really independent supplies and not a bundle.
Write the section 8 clause (a or b) in your answer to earn the provision mark.

Common mistakes in Composite and Mixed Supply

Applying the average or weighted rate to a bundle.
Students want a fair rate for each item.
Fix: Section 8 gives only two outcomes: the principal supply's rate or the highest rate. No averaging.
Treating any bundle as composite just because items are sold together.
Selling together is confused with naturally bundled.
Fix: Test whether the items go together in the ordinary course of business. A gift hamper of unrelated items is mixed.
Choosing the principal supply by highest value or highest rate.
Mixing up the two rules in section 8.
Fix: Principal supply is the main purpose of the deal. Highest rate is only for mixed supply.
Calling a mixed supply composite because the question says a 'package'.
Relying on the label.
Fix: Look at the facts. The name of the package does not decide the classification.
Forgetting to state the section in the answer.
Focus stays on the calculation.
Fix: Quote section 8(a) or 8(b) first, then analyse facts, then conclude.
Assuming inter-State bundles follow a different rule.
Not linking the IGST Act with the CGST Act.
Fix: Section 20 of the IGST Act applies the CGST rule on composite and mixed supply to integrated tax.

Worked examples

Example 1

Sharma Electronics Pvt. Ltd. sells an air conditioner to a customer in Pune for ₹40,000 and includes installation in the same invoice. Installation is ancillary to the sale. Assume the air conditioner attracts 28% and installation as a separate service attracts 18%. What rate applies to the whole supply?

Show the solution

Supplies: supply of an air conditioner and installation service, one invoice.
Natural bundling: a buyer of an air conditioner ordinarily expects installation. They are naturally bundled, so this is a composite supply.
Principal supply: the air conditioner. Installation only helps the customer use it.
Section 8(a) CGST Act: a composite supply is treated as a supply of the principal supply.
So the rate of the air conditioner applies to the whole: 28%.
Tax = 28% × ₹40,000 = ₹11,200.

Answer: It is a composite supply with the air conditioner as principal supply. The whole ₹40,000 is taxed at 28%, giving GST of ₹11,200.

Example 2

Kaveri Traders sells a festive gift pack for a single price of ₹2,000 (before tax). It contains sweets (assume 5% rate, value ₹800), a steel utensil (assume 12% rate, value ₹700) and a scented candle (assume 18% rate, value ₹500). The items are not otherwise sold together. Find the GST payable.

Show the solution

Supplies: sweets, utensil, candle, sold for a single price.
Natural bundling: these items are unrelated and not ordinarily sold together. There is no principal supply. So it is a mixed supply.
Section 8(b) CGST Act: a mixed supply is treated as the supply that attracts the highest rate of tax.
Rates: 5%, 12%, 18%. The highest is 18%.
Apply 18% to the whole ₹2,000: 18% × 2,000 = ₹360.

Answer: It is a mixed supply taxed at 18%, the highest rate. GST payable is ₹360.

Exam tips

Open with the section: write section 8(a) or 8(b) before analysing facts. Papers are case-based and reward provision, analysis, conclusion.
Write one sentence on why the items are or are not naturally bundled. This is where marks sit.
Show the rate comparison for mixed supply in a short list so the examiner sees the highest rate chosen.
Mention that section 20 of the IGST Act applies the same rule when the supply is inter-State.
Do not quote rates from memory as fixed facts. Use the rates given in the question.

Practice questions from Supply under 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 naturally bundled and has a principal supply, so the principal supply's tax treatment applies. A mixed supply is sold together for a single price but is not naturally bundled, so the highest rate applies. Section 8 CGST Act sets both rules.

What is a principal supply?

It is the main supply in a composite supply, the one that is the dominant purpose of the deal. The other supplies are ancillary to it. The whole bundle takes its tax treatment.

Which section governs tax liability on composite and mixed supplies?

Section 8 of the CGST Act. Clause (a) covers composite supply and clause (b) covers mixed supply. Section 20 of the IGST Act applies these provisions to integrated tax.

Does a single invoice make a supply composite?

No. One invoice or one price does not decide the type. You must check whether the supplies are naturally bundled in the ordinary course of business and whether there is a principal supply.