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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Supply under GST

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

A composite supply with a principal supply is treated as a supply of that principal supply. The whole bundle takes the principal supply's tax treatment. The highest-rate rule belongs to mixed supplies, not composite 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 supply is taxed separately at its own rate
  4. DIt is taxed at the average of the rates of all supplies

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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