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CMA Intermediate · Direct and Indirect Taxation · Concept of Supply including Composite and Mixed Supplies

Kavya Logistics, Chennai, provides a bundled service for a single price of Rs 2,00,000: transport of goods by road (principal supply, GST 5%), packing (18%) and insurance (18%). The services are naturally bundled in the ordinary course of business. The GST payable on the bundle under section 8 is:

GST payable is Rs 10,000. The services are naturally bundled, so it is a composite supply taxed as the principal supply, transport, at 5% on Rs 2,00,000. Applying the highest rate of 18% would be wrong because that rule is only for mixed supplies.

  1. ARs 10,000Correct
  2. BRs 36,000
  3. CRs 18,400
  4. DRs 20,000

Explanation

The bundle is a composite supply as the services are naturally bundled, with transport as the principal supply. Section 8(a) treats it as a supply of the principal supply, so 5% applies: 2,00,000 x 5% = Rs 10,000. Rs 36,000 wrongly applies the highest rate of 18%, which is the mixed supply rule.

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