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

Which one of the following statements about section 8 of the CGST Act, 2017 is correct?

Section 8 treats a composite supply with a principal supply as a supply of that principal supply, while a mixed supply is treated as the supply attracting the highest rate of tax. The statement matching the first rule is the correct one.

  1. AA mixed supply is treated as the principal supply of the bundle
  2. BA composite supply is taxed at the highest rate among its components
  3. CA composite supply comprising two or more supplies, one being a principal supply, is treated as a supply of that principal supplyCorrect
  4. DA mixed supply is taxed at the lowest rate among its components

Explanation

Section 8(a) gives the principal-supply rule for composite supplies. Section 8(b) gives the highest-rate rule for mixed supplies. Options A, B and D each swap or distort these two rules.

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