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CA Intermediate · Taxation · Supply under GST

Kapoor & Co., a Delhi firm, provides a composite service by supplying a bundled package: Rs 80,000 of event management (principal) with decoration and catering incidental to it, billed together for Rs 1,00,000. Which tax treatment applies to the whole package?

The whole package is taxed at the rate applicable to the principal supply, event management. It is a composite supply of naturally bundled services, and Section 8(a) says its tax treatment follows the principal supply. The highest-rate rule applies only to mixed supplies.

  1. AEach element taxed at its own rate
  2. BHighest rate among the elements applies
  3. CRate applicable to the principal supply, event management, applies to the wholeCorrect
  4. DExempt, since part is exempt

Explanation

A composite supply consists of two or more naturally bundled supplies, one of which is the principal supply. Section 8(a) taxes the whole at the rate of the principal supply. The highest-rate rule applies to mixed supplies, which is the key distractor.

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