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CA Intermediate · Taxation · Supply under GST

Desai Hospitality, Ahmedabad, provides to a customer a package for a wedding: banquet hall, catering of food and decoration, for a single price of Rs. 5,00,000. The principal supply is the banquet hall service. Under the CGST Act, 2017, this package is best treated as:

The package is a composite supply because hall, catering and decoration are naturally bundled for a wedding, with the banquet hall as the principal supply. The whole package is taxed at the rate applicable to the principal supply, not the highest rate.

  1. AA mixed supply taxed at the highest rate among the items
  2. BA composite supply taxed at the rate applicable to the principal supplyCorrect
  3. CSeparate supplies, each taxed at its own rate
  4. DAn exempt supply because the price is a single amount

Explanation

A composite supply has two or more taxable supplies naturally bundled in the ordinary course of business, one of which is the principal supply. It is taxed at the rate of the principal supply. A mixed supply (not naturally bundled) takes the highest-rate item, so option A is wrong. The question states a principal supply exists.

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