written by Khatabook | December 20, 2021

What is Composite and Mixed Supply Under the GST?

With the advent of the Goods and Services Tax (GST) in India, the concept of indirect tax and its regime has undergone a paradigm shift. One of the major impacts is the incidence of tax which is the “supply”.  Section 7 of the Central Goods & Services Tax Act, 2017 (CGST Act) defines supply as something which includes,

(a) All kinds of supply of goods or services or both such as sale, transference, barter, exchange, license, rental, lease or clearance sealed or agreed to be sealed for a consideration by a person in the course or furtherance of business; 

(b) Import of services for a consideration whether or not in the course or furtherance of business; and 

(c) Activities specified in Schedule I, made or agreed to be made without consideration.

Therefore, let's understand the concept of composite supply and mixed supply and the difference between them.

What is Supply under GST?

The term “supply” means all and any form of supply of goods and services. It has been conceived for being considered during any business or transaction that will include:

  • Sale
  • Exchange
  • Barter
  • Transfer
  • Rental
  • License
  • Lease
  • Disposal
  • Import of securing or services for consideration even if it is not eventually used for business purposes

 Certain activities listed in Schedule 1 of the GST Act also come under the purview of supply. 

What is the concept of composite supply and mixed supply and how does one categorise it?

 Composite and mixed supplies are a relatively new concept introduced as part of GST, which covers supplies made together, even if they are related or not. 

  •  Supplies that are part of two or more goods or services can be either composite supply or mixed supply.  
  • The concept of composite supply in GST is similar or akin to naturally bundled services under the Service Tax Law. 
  • However, the concept of mixed supply is new.

What is a bundled supply?

 A combination of goods or services is a bundled supply. The concept of supply of two or more taxable supplies naturally blended and supplies is called bundled supply. The concept was mainly found in Service Tax. 

Why is the concept of composite and mixed supply important?

The GST Council has defined specific rates for goods and services. The GST rate for every type of goods and services has been defined in GST Law. GST Rates are easier to identify for specific goods and services. However, sometimes the supply of a good or service may be linked or done together even though there is no connection. 

An example of this would be an air conditioner supplied with installation services. The GST Act defines how this kind of supply shall be rated. This is why the concept of composite supply and mixed supply becomes integral. It helps to understand the correct GST rate and ensure a uniform tax treatment under GST for such kinds of supplies.

How does one determine if the supply is naturally bundled or cannot be separated?

 The answer depends on the normal course of business and the normal practices followed in the industry. Here are a few ways to identify them:

  1. If buyers expect services to be provided as a package, then they will be treated naturally. For example, business conventions look for a combination of hotel accommodation, food, and convention centres.
  2. If most of the service providers in the industry offer a package of services, then it can be considered blended naturally. For example, food provided with an air ticket is common in most airlines. The nature of the services offered may differ in bundled supply. If there is the main service and an ancillary to it, then it is a bundled service. Another example is five-star hotels or resorts often provide complimentary breakfast during the length of stay. Renting a room is the primary service, and breakfast is ancillary. 
  3. Other indicators that could point towards determining if the service is bundled or not are:
  • A single price for the package even if customers opt for less. 
  • The components are advertised as a package as the different components are not available together. 

What is Composite Supply?

Composite supply means a supply that comprises more than one goods or services that are logically bundled and supplied with each other during the ordinary course of business. One of them will be the principal supply. The items cannot be sold separately. A composite supply is two or more goods or services sold in a pair or set and cannot be sold individually. Every composite supply will comprise a principal supply which is the main product or service intended to be bought by the customer. The rest is made of additional elements that add to the value of the principal supply. A composite supply under GST carries the same tax rate as the GST rate of the principal supply.

An example of composite supply- A box of sweets that is gift-wrapped. The sweets are the principal supply, while the gift box, wrapping for the gift and card in the form of a gift-wrapping service by the shopkeeper are the supporting elements. These cannot be sold or delivered individually without the sweets. This is a composite supply, and the rate of GST will be similar to the rate for the sweets.

Another example of composite supply in GST- A seller sells a brand-new car with the insurance, tool kit, seat upholstery, registration and maintenance services. This is an example of composite supply as the insurance, registration, seat upholstery, and maintenance services cannot be offered without the vehicle, which becomes the principal supply.


Whenever a seller sells the goods or services of a composite supply, the tax rate associated with the shipping charge equals the tax rate of the principal supply. So in relation to the example of sweets in a gift-wrapped box, the GST on shipping will equal the GST on the box of sweets. 

How to determine if a service falls under composite supply?

 To determine if goods or services fall under composite supply, it must meet the below criteria: 

  • Supply of two or more goods or services together, and
  • The two or more goods or services are a natural bundle provided during the normal course of business, and
  • The two or more cannot be sold individually.

Also Read: GST Input Tax Credit on Supply of Goods or Services

What is Mixed Supply?

A mixed supply is one or more independent services or products offered together as a package but can also be sold separately. Under GST, in a mixed supply, the service or item with the highest GST rate is taken as the principal supply (even if it is not part of the main bundle). The mixed supply is taxed at the same GST rate as the principal supply. 

An example of Mixed supply GST- A nursery sells plants for gardening along with ornamental plants, fresh flowers and garden maintenance services as a bundle. When sold separately, the plants and flowers will incur a certain GST rate, and the gardening services will incur a different rate. When offered together as a bundle of services, the whole service will incur a higher rate.

 Another example of mixed supply GST-  A boxed gift set for Diwali contains dry fruits, aerated drinks, canned foods, sweets, cakes and chocolates supplied at a single price is a mixed supply. Each of these can be sold separately. Whichever product in this box of goods has the highest GST rate will be considered the principal supply, and the same rate will apply to the whole box of goods. 


When the shopkeeper dispatches the contents of a mixed supply, the tax rate associated with the shipping charge will be equal to the tax rate applied to the bundle.

What is the difference between composite supply and mixed supply?

In the first instance, composite supply and mixed supply may look very similar. The primary aspect is the supply of goods or services as a bundle for a common or single price in both cases. But then, what is the difference? 

  • The first difference: Principal Supplies

In a composite supply, one item or service is the key or main part of the supply. In a mixed supply, no one part is the main or key. However, in a mixed supply, the item or service with the highest GST rate is treated as the principal supply.

  • The second difference: Supplies available individually

There would be no meaning or sense in selling the secondary or ancillary parts individually or as a principal in a composite supply. For example, the towels and bedding provided in a hotel room. On the contrary, in a mixed supply, any individual item could be sold separately. For instance, a grocery bundle is sold as a package, like a bag of rice and wheat.

To understand it in a simplified manner, follow the table below:


Composite Supply

Mixed Supply

Main item or service

Principal item or service

An item with the highest rate of tax

Applicable tax rate

Rate of tax on the principal item

Highest tax rate among all the items

How to determine if it is composite supply or mixed supply?

Now that you have understood what is a composite supply and mixed supply under GST, you need to know how to determine if the supply is composite or mixed. If the items or services cannot be sold separately and need to be bundled with a principal item or service, then it is a composite supply. 

 On the other hand, if the goods or services are not bundled naturally ordinarily in the normal course of business, it would be classified as a mixed supply. For example, a pack of toothpaste and toothbrush is sold together. Both the toothpaste and toothbrush can be sold separately. All the items will be taxed separately. 

Some further examples to understand the concept of composite and mixed supply:

Example 1- Booking of train tickets

You book a ticket aboard the Rajdhani Express, which includes a meal. The meal in the Rajdhani express cannot be sold individually and has to be sold as a bundle with the ticket. The ticket for point-to-point transport is the principal supply, and the rate for the principal supply will apply to the whole bundle.

Example 2 – Buy a bag of rice and get a pressure cooker free

Many shops sell food items like rice, wheat etc., along with cooking equipment. In this case, both the bag of rice and the pressure cooker can be sold individually. The item with the highest rate of GST will determine the GST rate for the bundle when sold together.

Also Read: Types of GST in India - What is CGST, SGST and IGST?


Given the incidence of tax, no supplier would prefer to be categorised under mixed supply. It is evident that all the components in the transaction will attract the tax rate of the particular good or service that attracts the highest tax rate. On the contrary, such an inclination or bias will not be held in the case of composite tax as the supplies of goods that form the principal supply will determine the classification and the rate of GST application for the entire transaction. It is not the choice of any individual with respect to the rate of tax. 

Every transaction needs to be reviewed closely to examine and determine the classification of the supply. Post scrutiny, it can be determined whether it will attract composite supply or mixed supply. Even though the determination applies to subjective and objective tests, the entire exercise of classification makes it a complex task. Suppliers are expected to appreciate the nuance in the concepts and then undertake appropriate classification of supplies and goods. To know more about GST and its related concepts, subscribe to Khatabook.


Q: Are there any activities that do not fall under the category of supply of goods and services?


Schedule III of the GST Law does list certain activities which cannot be classified under the supply of goods and services, such as:

  • Services of an employee to an employer during employment
  • Services by a court or tribunal governed by any law
  • Functions or duties performed by Members of Parliament, Local Authorities, Constitutional bodies and State Legislatures
  • Mortuary, crematorium, burial and funeral services
  • Sale of Land
  • Claims made by betting, gambling and lottery

Q: Will the supply of software be classified as the supply of goods or services?


It will be treated as a supply of services. Development, designing, programming, customising, adapting, enhancing and implementing information technology and software will be treated as supply of services under Schedule II of GST Law.

Q: What is a taxable event under GST?


A taxable event under the GST act is the supply of goods, services or both under the remit of the course of business. Under existing indirect tax laws, taxable events for sales, manufacturing and services will be considered “supply”.

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