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

Mehta Travels supplies a package for ₹50,000 in which transport service forms the principal supply (GST 5%), with a hotel stay incidental to it (GST 18%) naturally bundled in the ordinary course. The package is a composite supply. What is the GST payable on the package?

GST payable is ₹2,500. Because the package is a composite supply, Section 8(a) treats it as the principal supply, transport, taxed at 5% on ₹50,000. Using the 18% hotel rate would wrongly apply the mixed supply rule.

  1. A₹9,000
  2. B₹2,500Correct
  3. C₹5,750
  4. D₹11,500

Explanation

For a composite supply, Section 8(a) treats the whole as a supply of the principal supply. Principal supply is transport at 5%, so GST = 50,000 x 5% = ₹2,500. Applying 18% (₹9,000) wrongly uses the highest-rate rule of mixed supplies.

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