Section 2(30) of the CGST Act: Definition of "Composite Supply"
Section 2(30) of the CGST Act: Definition of "Composite
Supply"
"Composite
supply" means a supply made by a taxable person to a recipient consisting
of two or more taxable supplies of goods or services or both, or any
combination thereof, which are naturally bundled and supplied in conjunction
with each other in the ordinary course of business, one of which is a principal
supply;
Detailed Analysis
1.
Two
or More Taxable Supplies:
o
A
composite supply involves at least two or more supplies of goods, services, or
a combination of both.
2.
Naturally
Bundled:
o
These
supplies are naturally bundled, meaning they are commonly provided together in
the ordinary course of business. This natural bundling is not forced but is
typically how these supplies are offered.
3.
Supplied
in Conjunction:
o
The
supplies are made together in a single transaction to a recipient. They are not
supplied separately or independently.
4.
Principal
Supply:
o
Among
the bundled supplies, one is identified as the principal supply. The principal
supply is the main item or service that imparts the essential character to the
bundle.
Illustration and Example
Illustration:
- Goods Packed and Transported
with Insurance:
- When goods are sold, they
might be packed, transported, and insured as part of the transaction.
Here, the principal supply is the goods. Packing materials, transport,
and insurance are ancillary to the main supply of goods. Hence, the whole
bundle is treated as a composite supply with goods as the principal
supply.
Practical Examples
1.
Restaurant
Services:
o
A
restaurant provides food along with ambiance, seating, and other services. The
primary supply here is the food, while the ambiance, seating, and services are
ancillary. Therefore, it is a composite supply with the food being the
principal supply.
2.
Hotel
Accommodation:
o
When
a hotel offers a stay package that includes breakfast, Wi-Fi, and access to the
gym. The principal supply is the hotel accommodation, and the breakfast, Wi-Fi,
and gym access are ancillary services. This package is a composite supply with
hotel accommodation as the principal supply.
3.
Air
Travel:
o
When
an airline sells a ticket that includes the flight, in-flight meals, and
baggage handling. The principal supply is the air transportation, while
in-flight meals and baggage handling are ancillary services. The entire package
is a composite supply with air transportation as the principal supply.
Tax Implications
The
GST rate applicable to a composite supply is determined by the principal
supply. For instance, if the principal supply in a composite bundle is goods
that attract an 18% GST rate, then the entire composite supply will be taxed at
18%.
Conclusion
Section
2(30) of the CGST Act ensures clarity in how naturally bundled supplies are
taxed. By identifying the principal supply, it simplifies the application of
GST rates and compliance, ensuring that businesses and tax authorities can
handle such transactions consistently and transparently.