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CA Intermediate · Taxation · Supply under GST

Kiran Ltd., Pune, supplies to a customer a package for a single price of Rs 1,00,000 consisting of a branded water purifier (taxable at 18%) and a free annual maintenance service provided as a natural part of selling it. The purifier is the principal supply. What is the correct GST treatment?

This is a composite supply because the maintenance service is naturally bundled with the purifier in the ordinary course of business. The whole Rs 1,00,000 is taxed at the principal supply's rate of 18%, not at the highest rate as for mixed supplies.

  1. ATreat as composite supply; whole Rs 1,00,000 taxed at the rate of the water purifier, 18%Correct
  2. BTreat as mixed supply; taxed at the highest rate among the items
  3. CTreat each as separate supply with separate valuation
  4. DTreat as exempt because maintenance is free

Explanation

Two or more supplies naturally bundled in the ordinary course of business, one being the principal supply, form a composite supply. It is taxed at the rate of the principal supply. Option B is wrong because mixed supply applies where items are not naturally bundled and are sold at a single price.

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