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CA Intermediate · Taxation · Supply under GST

Gupta Logistics, Nagpur, charges a customer a single lump-sum price of Rs 1,00,000 for transporting goods by road (GTA service, 5% GST without ITC) together with packing of the goods (18% GST) as a package, where transport is the principal supply and packing is naturally bundled with it in the ordinary course. GST on the transport service, if it is the principal supply, is 5%. What is the GST payable on the whole package, ignoring forward-charge or RCM considerations?

GST payable is Rs 5,000. Transport with naturally bundled packing is a composite supply, taxed entirely at the rate of the principal supply, which is transport at 5% of Rs 1,00,000. The highest-rate rule applies only to mixed supplies.

  1. ARs 5,000, because a composite supply is taxed at the rate of the principal supplyCorrect
  2. BRs 18,000, because the higher rate always applies
  3. CRs 11,500, being the average of the two rates
  4. DRs 5,000 on transport plus Rs 18,000 on packing

Explanation

Packing naturally bundled with transport forms a composite supply, which is taxed at the rate applicable to the principal supply. Principal supply here is transport at 5%, so GST is 5% of Rs 1,00,000 = Rs 5,000. The highest-rate rule applies to mixed supplies, not composite ones. Charging both separately ignores the bundling.

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