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CMA Intermediate · Direct and Indirect Taxation · Computation of GST Liability

Kaveri Interiors, a registered firm, supplies a naturally bundled package for Rs 5,00,000: furniture (principal supply, GST 18%) together with transport and installation services (GST 5% if supplied alone). The package is a composite supply. GST payable on the package is:

GST payable is Rs 90,000. In a composite supply the whole package is treated as the principal supply, furniture at 18 percent, so ancillary transport and installation do not change the rate. Eighteen percent of Rs 5,00,000 is Rs 90,000.

  1. ARs 90,000Correct
  2. BRs 25,000
  3. CRs 62,500
  4. DRs 1,15,000

Explanation

For a composite supply, Section 8(a) applies the principal supply treatment. The principal supply is furniture at 18%, so tax is 5,00,000 x 18% = Rs 90,000. Rs 25,000 wrongly applies the 5% rate of the ancillary services.

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