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CA Intermediate · Taxation · Supply under GST

Anand Pharma Ltd, Hyderabad, supplies a pack to a hospital comprising a medicine kit costing Rs 500, a thermometer Rs 200 and a first-aid manual Rs 100, all sold together for Rs 800 as a single price. The principal element is the medicine kit, and the other items are naturally bundled with it. How is the supply classified?

This is a composite supply because the items are naturally bundled in the ordinary course of business and the medicine kit is the principal supply. The whole pack is therefore taxed at the rate applicable to the medicine kit, not the highest rate.

  1. AMixed supply, taxed at the highest rate among the items
  2. BComposite supply, taxed at the rate applicable to the principal supply, the medicine kitCorrect
  3. CThree separate supplies, each taxed at its own rate
  4. DComposite supply, taxed at the rate applicable to the highest-value ancillary item

Explanation

Goods naturally bundled in the ordinary course of business, with one principal supply, form a composite supply. It is taxed at the rate of the principal supply. A mixed supply is a combination not naturally bundled and taxed at the highest rate, so that option is wrong here.

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