A composite supply is two or more naturally bundled supplies taxed at the rate of the principal supply; a mixed supply is a combination not naturally bundled, taxed at the highest applicable rate. Section 8 of the CGST Act decides which applies, and it directly affects the GST rate charged.
The two concepts
A composite supply (Section 2(30)) consists of supplies that are naturally bundled and supplied together in the ordinary course of business, one being principal. A mixed supply (Section 2(74)) is two or more independent supplies sold for a single price that are not naturally bundled. The classification fixes the rate under Section 8.
The Section 8 rule
| Type | Rate applied | Example |
|---|---|---|
| Composite supply | Rate of the principal supply | Goods + transit insurance + freight billed together |
| Mixed supply | Highest rate among the items | A gift hamper of chocolates, juice and a toy at one price |
Worked examples
Composite: A laptop sold with a pre-loaded warranty and delivery is a composite supply; the laptop is the principal supply, so the whole is taxed at the laptop's rate. Mixed: A festival hamper containing items taxed at 5%, 12% and 18% sold for one price is a mixed supply, taxed entirely at 18% (the highest). Pricing items separately can change the outcome.
Why it matters in practice
- Mixed-supply classification can raise the effective rate — structure bundles deliberately.
- 'Naturally bundled' is judged by trade practice and customer expectation.
- Invoice description should support the classification taken.
- Restaurant, hotel and works-contract bundles have specific clarifications — sector rulings.
Key takeaways
- Composite supply: taxed at the principal supply's rate.
- Mixed supply: taxed at the highest rate of any item.
- Section 8 decides; 'naturally bundled' turns on trade practice.
- Bundle and invoice deliberately to manage the effective rate.