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

Under the CGST Act, 2017, how is the tax liability on a composite supply comprising two or more supplies determined?

A composite supply is treated as a supply of the principal supply. The whole bundle takes the character and tax rate of that principal supply, whereas the highest-rate rule applies only to mixed supplies.

  1. AIt is treated as a supply of the principal supplyCorrect
  2. BIt is treated as a supply of the item attracting the highest rate of tax
  3. CEach component is taxed separately at its own rate
  4. DIt is taxed at the average of the rates of all components

Explanation

Section 8(a) provides that a composite supply comprising two or more supplies, one of which is a principal supply, is treated as a supply of that principal supply. The highest-rate rule applies to mixed supplies, not composite supplies, so the second option is wrong.

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