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CA Intermediate · Taxation · Supply under GST

Kapoor Hotels Ltd, Delhi, supplies the following to a customer for a single price: a room for stay, breakfast and airport pick-up in a car. Principal supply is the room. Another trader, Verma Gifts, sells a gift hamper of chocolates, a diary and a pen to customers; the items are also sold separately. Which statement is correct?

The hotel package is a composite supply because its elements are naturally bundled around the room as the principal supply, while the gift hamper is a mixed supply because it combines independent items, and is taxed at the highest rate among them.

  1. ABoth are composite supplies and taxed at the rate of the principal supply
  2. BThe hotel package is a composite supply; the gift hamper is a mixed supply taxed at the highest rate among itemsCorrect
  3. CBoth are mixed supplies taxed at the highest rate
  4. DThe hotel package is a mixed supply; the gift hamper is a composite supply

Explanation

Composite supply has two or more supplies naturally bundled in the ordinary course, one being principal; tax is at the principal supply rate. Hotel room, breakfast and pick-up are naturally bundled. A hamper of items that can be sold independently is a mixed supply, taxed at the rate of the item with highest rate.

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