Composite and Mixed Supply under GST (With Simple Examples)

One of the most interesting — and sometimes confusing — parts of GST is figuring out how to tax bundled transactions.

We often buy products or services that come with add-ons or combinations. For example:

• Buying a mobile phone with a warranty,
• Hotel stays that include breakfast,
• Internet packages that include voice calls and data.

So how does GST treat such combinations?

That’s where the concept of Composite Supply and Mixed Supply comes in.

These two terms help decide how tax is calculated when multiple goods or services are supplied together.

Let’s break it down in simple terms — with easy examples.

What Are Composite and Mixed Supplies?

Under GST, if a transaction includes more than one good or service, you need to check:

• Are they naturally bundled together? (→ Composite supply)
• Or are they just combined for convenience? (→ Mixed supply)

This distinction decides which GST rate applies to the whole bundle.

Composite Supply – Meaning

A Composite Supply means a supply made by a taxable person to a recipient,

• consisting of two or more goods or services,
• which are naturally bundled and supplied together in the ordinary course of business,
• where one of them is the principal supply.

That principal supply determines the GST rate for the entire transaction.

In Simple Words:

If you’re selling multiple things together that belong together naturally — and one item is the main one — then the whole bundle is treated as one supply of that main item.

Examples of Composite Supply

Let’s look at some clear examples to understand:

Example 1: Mobile Phone with Warranty

A company sells a mobile phone with a one-year warranty. The phone is the main product, and the warranty is part of the overall deal.

👉 Since they are naturally bundled (you can’t really separate the warranty from the phone), this is a composite supply, and GST will apply at the rate of the mobile phone.

Example 2: Hotel Stay with Complimentary Breakfast

A hotel charges ₹6,000 per night, including breakfast. Here, the main service is accommodation, while the breakfast is secondary.

👉 This is a composite supply, and the GST rate for hotel accommodation will apply to the whole package.

Example 3: Transportation with Insurance

A logistics company transports goods from Delhi to Mumbai and also provides insurance for the cargo.

👉 The principal supply is transportation. Insurance is incidental and part of the overall service. Hence, this is a composite supply, and GST applies at the rate for transportation services.

Example 4: Computer Installed with Preloaded Software

A company sells a laptop with pre-installed software. The software comes as part of the package — not separately sold.

👉 The main supply is the laptop, so the whole thing is treated as supply of goods.

🧠 Key Point to Remember

In composite supply, the principal supply decides the GST rate. You don’t apply different rates for each item — you treat it as one single supply.

Mixed Supply – Meaning

A Mixed Supply means two or more individual goods or services supplied together for a single price,

• where the combination is not naturally bundled,
• and each item could be supplied separately.

In this case, the highest GST rate among the items in the bundle applies to the entire package.

In Simple Words:

If you combine unrelated items and sell them as one package — like a festival combo — that’s a mixed supply.

Examples of Mixed Supply

Example 1: Diwali Gift Hamper

A retailer sells a gift hamper for ₹2,000 containing chocolates, juice, chips, and candles. Each of these could be sold separately — they’re not naturally bundled.

👉 This is a mixed supply, and GST will be charged at the highest rate applicable among all items.

Example 2: Shampoo + Perfume Combo Pack

A cosmetic company sells a combo pack with shampoo (18% GST) and perfume (28% GST) together for ₹499.

👉 Since these are distinct products sold together for convenience, this is a mixed supply. The highest GST rate (28%) will apply on the total price.

Example 3: Holiday Package with Flight + Hotel + Local Sightseeing

A travel agency offers a single combined package that includes air travel, hotel stay, and sightseeing for one price.

👉 While these can be booked separately, they’re combined for marketing convenience, not natural bundling. So, this is a mixed supply, and the highest rate among the services will apply.

Example 4: Snack Box Combo

A snack company sells a combo containing chips, chocolates, and soft drinks for one price.

👉 Again, all items have separate GST rates — since they’re not naturally bundled, it’s a mixed supply.

Composite vs Mixed Supply – Key Differences

Here’s a simple comparison table to make it clearer:

Why the Difference Matters

The difference between composite and mixed supply isn’t just theory — it directly affects:

• GST rate applied to the transaction,
• Tax liability for the business, and
• Compliance reporting in GST returns.

Misclassifying a mixed supply as composite (or vice versa) can lead to underpayment or overpayment of tax, penalties, and confusion during audits.

Example Comparison – Same Items, Different Treatment

Let’s look at a relatable example that shows how context changes everything 👇

Case 1: Composite Supply

A courier company transports goods and provides insurance for safe delivery. 👉 Both services go hand in hand — they’re naturally bundled. GST applies as per transportation service (principal supply).

Case 2: Mixed Supply

The same company offers a festival combo – courier service + gift wrapping + greeting card. 👉 These are not naturally related — they’re a marketing combo. GST applies at the highest rate among the items.

How to Identify Composite vs Mixed Supply (Simple Checklist)

Ask these questions:

• ✅ Are the items normally supplied together in this industry?
• ✅ Can one exist without the other?
• ✅ Is there one main item/service and others supporting it?
• ✅ Are all items sold for a single combined price?

If the first three are yes, it’s Composite Supply. If the last one is yes but the others are no, it’s Mixed Supply.

Legal Reference (Simplified)

According to Section 2(30) and 2(74) of the CGST Act, 2017:

• Composite Supply: A naturally bundled combination of two or more taxable supplies where one is the principal supply.
• Mixed Supply: A combination of two or more individual supplies made together for a single price, not naturally bundled.

Practical Business Applications

Real GST Impact Example

Let’s say a company sells a printer (18% GST) with installation service (18%) for ₹20,000 total.

✅ This is a composite supply — both are naturally bundled. GST = 18% on ₹20,000 = ₹3,600.

But if the company offers a combo — printer (18%) + headphones (28%) for ₹20,000 — 👉 It’s a mixed supply — highest rate applies. GST = 28% on ₹20,000 = ₹5,600.

That’s a ₹2,000 difference — just because of how the bundle is classified!

Final Thoughts

The concept of Composite and Mixed Supply under GST may look technical, but it’s actually about common sense.

GST simply asks — are these things naturally meant to be together, or did you combine them for sale?

If they belong together — it’s Composite Supply. If they don’t — it’s Mixed Supply.

Understanding this helps businesses:

• Apply the correct tax rate
• Avoid classification errors
• Stay fully GST compliant

In short:

Also Read: Schedule III – Non-Supply Goods and Service Activities