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

Veda Travels sells a package comprising a rail ticket for transport, a meal on board and a newspaper, all naturally bundled with the transport as the principal supply. Transport of passengers attracts 5%, the meal 5%, and the newspaper is taxed at nil. A student argues that the highest-rate rule applies. Which statement is correct under Section 8?

The package is a composite supply because the components are naturally bundled with transport as the principal supply. Under Section 8(a) the whole package is treated as a supply of the principal supply, so the highest-rate rule for mixed supplies does not apply.

  1. AIt is a mixed supply, taxed at the highest rate among the components
  2. BIt is a composite supply, treated as a supply of the principal supply, which is the transportCorrect
  3. CEach component is taxed separately at its own rate
  4. DIt is exempt because one component is nil rated

Explanation

The services are naturally bundled and one is the principal supply, so it is a composite supply. Section 8(a) treats it as a supply of the principal supply, transport. The highest-rate rule in Section 8(b) applies only to mixed supplies.

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