MIXED SUPPLY UNDER GST LAWS

[Mr. M. GOVINDARAJAN]

Mixed supply

Section 2(74) of the Act defines the expression ‘mixed supply’ as two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

One illustration is given in the said section - A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

In order to identify if the particular supply is a mixed supply, the first requisite is to rule out that the supply is a composite supply.  A supply can be a mixed supply only if it is not a composite supply.  As a corollary it can be said that if the transaction consists of supplies not naturally bundled in the ordinary course of business then it would be a mixed supply.  Once the amenability of the transaction as a composite supply is ruled out, it would be a mixed supply, classified in terms of a supply of goods or services attracting highest rate of tax.

Determination of tax liability

The mixed supply, if involves supply of a service liable to tax at higher rates than any other constituent supplies, such mixed supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable.   Alternatively, the mixed supply, if involves supply of goods liable to tax at higher rates than any other constituent supplies, such mixed supply would qualify as supply of goods and accordingly the provisions relating to time of supply of services would be applicable.

Case laws

Some rulings given by Authority for Advance Ruling as well as Appellate Authority for Advance ruling in respect of mixed supply are furnished as below-

Printing service

IN RE: M/S. INFOBASE SERVICES PVT. LTD. - 2019 (12) TMI 1118 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL , the Authority for Advance Ruling observed that the applicant, apart from supplying printing service and the service as an intermediary on behalf of the Club for selling space for advertisement, has agreed to the obligation to match the cost of financing the project of printing from the proceeds from selling space for advertisement. The consideration for doing it successfully is 75% of the amount by which the proceeds from selling space for advertisement exceed the cost of printing.  If it fails in its obligation, it has to pay the club the amount by which the proceeds from selling space for advertisement fall short of the cost of printing, as charge for tolerating the failure.

It is evident that the applicant is making a bundled supply to the club of printing service and intermediary service and charging a single price for the bundle as the project cost for printing.  The two services are not naturally bundled or supplied in conjunction with each other in the ordinary course of business.  They are bound by an obligation and are a specific feature of the agreement between the applicant and the club.  It is, therefore, not a composite supply.

The Authority for Advance Ruling ruled that it is a mixed supply within the meaning of section 2(47) of the Act.  It should, therefore, be treated as supply of that service which attracts the highest rate of tax i.e., 18%.

Lodging services

IN RE: M/S. SARJ EDUCATIONAL CENTRE - 2019 (7) TMI 314 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the  appellant is the owner of a private boarding house and is providing services of lodging and food exclusively for the students of a school run by a charitable society. 

The appellant sought for advance ruling on the following questions-

• Whether or not services provided by the appellant to the students of lodging and supply of food is composite supply within the meaning of section 2(30) of the Act?

• Whether supply of such service is eligible for exemption under Sl. No. 14 of the Notification No. 12/2017 - Central Tax (Rate), dated 28.06.2017?

• The tax rate applicable for the combination of services provided if it is not considered a composite supply.

The Authority for Advance Ruling ruled that the appellant is offering several individual services in two different combinations to the recipients, depending upon their need for lodging facility.   None of the combinations of services being offered is a composite supply, as defined under section 2 (30) of the CGST Act but are mixed supplies within the meaning of section 2 (74) of the CGST Act and the value of the entire combination of services offered by the appellant is taxable at the applicable rate.

The appellant filed appeal before the Appellate Authority challenging the findings of the lower authority.  The appeal is on two parts-

• The applicant should be considered as an educational institution within the meaning of 2(y) of the exemption notification.

• The service provided by them is a composite supply.

The Appellate Authority observed that the applicant is engaged in supplying food, laundry service, housekeeping service etc., which are not naturally bundled with lodging service.  All these components are independent of each other and can be supplied separately.  Therefore none of the services are bundled together in the natural way and there appears to be no principal service.  The Appellate Authority for Advance Ruling upheld the order of the Authority for Advance Ruling and dismissed the appeal filed by the appellant.

Supply of electroInk

IN RE : HP INDIA SALES PRIVATE LIMITED - 2018 (10) TMI 1515 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA, the applicant sought for an advance ruling on the classification of electroInk supplied along with consumables under the Act. 

The Authority for Advance Ruling observed that the recipient of supply is having no option to select individual supply, transaction of supply of electroInk with consumables cannot be considered as naturally bundled supply but a compulsory supply.  The consumption of supplies has its own pattern and each of such supplies can be supplied separately.

The Authority for Advance Ruling ruled that the supply not having the essential character of bundled supplies, it cannot be considered as a composite supply but a mixed supply under section 2(74) of the Act.           

The applicant filed appeal against the ruling given by the Authority for Advance Ruling before the Appellate Authority for Advance Ruling [IN RE: M/S. H.P. SALES INDIA PVT. LTD. - 2020 (6) TMI 706 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA]

The appellant contended that the supply made by them is the composite supply.  The ‘compulsory supply’ as ruled by the Authority for Advance Ruling has not been defined in the Act.   

The Appellate Authority for Advance Ruling considered the arguments put forth by the applicant.  The Appellate Authority for Advance Ruling observed that in the case what immediately comes to mind is that all the products are equally important for the printing to happen.  One of the major ingredients of a composite supply is that, one of the supplies is a ‘principal supply’ and the others are subservient or incidental to it.  Such is not the case here.  It cannot be said that the ElectroInk is the principal supply here and other like the developer of the plate are incidental – on the other hand they are equally important to complete the supply.  The appellant has given no evidence that the program given is an industry practice. 

The Appellate Authority for Advance Ruling upheld the ruling given by the Authority for Advance Ruling as the present supply is the mixed supply and not composite supply.

Lodging with food for students

IN RE: M/S. SARJ EDUCATIONAL CENTRE - 2019 (2) TMI 1605 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant owns a private boarding house and is providing service of lodging and food exclusively to the students of a secondary school, run by a charitable society. 

The applicant sought for an advance ruling on whether the services of the applicant to the students for lodging along with food is a composite supply and whether such supply is eligible for exemption under Sl. No. 14 of Notification No. 12/2017 - Central Tax (Rate), dated 28.06.2017.  

The Authority for Advance Ruling observed that the services rendered by the applicant is not to the educational institute but directly to students and hence the exemption provided to the educational institutes under Sl. No. 66 of Notification No. 12/2017 - Central Tax (Rate) is not applicable.  The applicant is supplying services both to ‘day boarders’ without lodging as well as boarders with lodging and additional services of food, medical, housekeeping, laundries etc., at flat rate for different services.  All these services are not naturally bundled inasmuch as that these are not indivisible with separate consideration.  These are individual services supplied in different combinations to recipient as per need and requirements. 

The Authority for Advance Ruling ruled that these services are not composite supply but constitutes mixed supply of services.  Different rates of GST are applicant on constituents of the said mixed supply. 

Storage and warehousing services

IN RE: M/S. AWLA INFRA - 2019 (2) TMI 1002 - AUTHORITY FOR ADVANCE RULING, HARYANA, the applicant was granted letter of allotment for construction of godowns for specified category at one location under PEG 2008 scheme of the Government of India at agreed rates of rent per quintal per month.  The applicant leased the said godowns to Food Corporation of India on lease and service basis which besides renting out of the said godowns also includes providing services of storage, preservation and warehousing of wheat of Food Corporation of India.  The applicant asserted that the entire supply is that of ‘Storage and warehousing Services’ which is an exempt supply for agricultural produce.  The Authority for Advance Ruling did not accept the contention of the applicant because in terms of agreement, the lessee is at liberty to store any goods of other third party also. 

It is clear that the applicant is providing two services i.e., support services in relation to agricultural produce as well as Real Estate Services.  Since both of these services can be provided independent of each other, these are not naturally bundled and hence are mixed supply. 

The Authority for Advance Ruling ruled that the applicant is liable to pay highest of two rates applicable these two supplies i.e., 18% (9% CGST + 9% SGST) applicable to Real Estate Service under SAC 997212.

Medicines

IN RE: M/S. COLUMBIA ASIA HOSPITALS PRIVATE LIMITED - 2018 (12) TMI 474 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA, the Authority for Advance Ruling ruled that where the doctors prescribe medicines and the patients, if they are free to purchase the medicines from any pharmacist (need not be from the same hospital), then such purchase of medicines from the pharmacies of the applicant cannot be treated as a part of composite supplies but as mixed supply as they are independent of the healthcare services provided by the applicant.  The food and drinks supplied to the patients are also not form part of composite supply.  But where supply of medicines and food and drinks for part of the supply of health care services and there is no choice for the patients to choose them separately, then they would form a composite supply with healthcare services being the principal supply.

Workwear

IN RE: M/S. LINDSTORM SERVICES INDIA PRIVATE LIMITED - 2018 (12) TMI 1275 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the applicant is renting workwear.  Besides, the applicant is performing ancillary activities such as transport of workwear, weekly cleaning, maintenance, repairs and finishing of workwear. 

The applicant sought for advance ruling in respect of the following questions-

• Does this supply qualify as ‘composite supply’ as per section 2(30) of the CGST Act, 2017?

• Alternatively, does this supply constitute a ‘mixed supply’ under section 2(74) of the CGST Act?

In case if it qualifies as ‘composite supply’-

• What will be the ‘principal supply’ for the purpose of section 2(90) of the Act?

• What will tire applicable rate of GST?

• Whether the conclusion (i.e., the transaction is a ‘composite supply’) will remain the same in addition to the services covered in the first question the applicant company also provides additional service of renting of locker as part of the same consideration?

The Authority for Advance Ruling observed that the contract consists of more than two taxable supplies of services.  The services other than renting of workwear supplies are not in the ordinary course of business but under compulsion imposed by the applicant on customer.  The services such as washing, maintenance and transportation etc., are stand alone services and are normally available separately.  Such services are independent of service of renting of workwear. 

The Authority for Advance Ruling ruled that the supply is not a composite supply but mixed supply.  Since the question no. 1 is answered as a mixed supply there is no need to answer second question which requires on composite supply.

Valuation

IN RE : HP INDIA SALES PRIVATE LIMITED - 2018 (10) TMI 1515 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA, the impugned transaction is a mixed supply with the nature of supply as continuous supply of goods for single price.   The Authority for Advance Ruling ruled that the value of supply of goods shall be the transaction value as reflected in the invoice issued by the applicant under section 31(4).

UPS

IN RE : SWITCHING AVO ELECTRO POWER LTD. - 2018 (4) TMI 810 - AUTHORITY FOR ADVANCE RULING , WEST BENGAL the applicant is a supplier of power solutions, including UPS, servo stabilizer, batteries etc. 

The applicant wants a ruling on the classification of the supply when it supplies UPS along with the battery.  More specifically, the applicant wants a ruling on whether such supplies can be treated as composite supply within the meaning of section 2(30) of the CGST/WBGST Act, 2017.

The Authority for Advance Ruling observed that UPS cannot function on its own unless it has either a built in battery in it or a battery is supplied separately either as a part of same contract or as separately supply.   In the first case when UPS is supplied with a built-in battery, both are inseparable and thus naturally bundled.  Such a product would form a composite machine, in terms of Note 3 to section XVI of customs Tariff Act, 1975 as two machines fitted together with the classification of machine with principal function i.e., UPS.  The supply in such case would also be a composite supply and its classification has to be that of UPS under Heading 8504 of Customs Tariff Act, 1975.  It would be taxable under Sl. No. 375 of Schedule III of Notification No. 01/2017 - Central Tax (Rate), dated 28.06.2017.   However, if these goods are supplied separately under separate contract prices, then while UPS would be classified as above, batteries would be classifiable separately under Heading 8507 as accumulator battery.  These would be taxable under Sl. No. 139 of Schedule IV.  As regard issue raised in the application, i.e., when these items are supplied as separate goods but under a single contract price in one invoice, the applicant is of the view that this supply is a naturally bundled composite supply and should be taxable as UPS.  The said plea was not acceptable because a natural bundled supply is one where the contract is indivisible.  However the supply of UPS with battery is not indivisible as it can be split in two separate supplies if so desired by the recipient.  As per GST law, if a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies. 

The Authority for Advance Ruling ruled that the supply of UPS and batteries in this case would be a mixed supply as defined under section 2(74) of the CGST Act, 2017 and taxable accordingly i.e., higher of two rates.

The applicant filed an appeal before the Appellate Authority for Advance Ruling against the ruling given by the Authority for Advance Ruling [IN RE: M/S. SWITCHING AVO ELECTRO POWER LIMITED - 2018 (8) TMI 1071 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL].

The Appellate Authority for Advance Ruling agreed with the Authority for Advance Ruling’s observation that the UPS serves no purpose if the battery is not supplied or removed.  It cannot function as a UPS unless the battery is attached.   However, what needs to be considered is whether or not these two items are ‘naturally bundled’.  The stated illustration to section 2(30) of the GST Act refers to a supply where the ancillary services are inseparable from the principal supply and form an integral part of the composite supply.  Note 3 also refers to a composite machine as the one consisting of two or more machines fitted together to form a whole.  When a UPS is supplied with built-in batteries so that the supply of the battery is inseparable from supply of the UPS, it should be treated as a composite supply and as a composite machine in terms of Note 3.  The UPS is the principal supply the relevant tariff head for the composite supply will be 8504 under Sl. No.375 of Schedule III in terms of Notification No. 01/2017 - Central Tax (Rate), dated 28.06.2017. (1125-FT, dated 28.06.2017 of State tax)

The Appellate Authority for Advance Ruling ruled that the storage battery has multiple uses and can be put to different uses and when supplied separately with static converters (UPS) it cannot be considered as a composite supply or a naturally bundled supply.

Management Support services of relocation related services

 IN RE: M/S. CARTUS INDIA PRIVATE LTD. - 2019 (10) TMI 1135 - AUTHORITY FOR ADVANCE RULING, KARNATAKA, the applicant primarily engaged as an agent for facilitation of relocation of its employees from one station to another.  The services relating to relocation are either supplied by the applicant directly or the facilities came through third party who bill directly to company for such services with the applicant only getting agency charges. 

The Authority for Advance Ruling observed that the services so supplied in aforesaid two manners are not uniform but based on requirement of each employee.  Separate service charges are fixed for a particular service and hence it cannot be called a single supply with common price. 

The Authority for Advance Ruling ruled that it is not a naturally bundles composite supply but a mixed independent supply of various services/goods. 

The Authority for Advance Ruling further ruled that the services provided to the company as an agent are ‘management support services of relocation related services’ which is a single service covered under SAC 9985 and is covered under Entry 23(ii) of Notification No. 11/2017 - Central Tax (Rate), dated 28.06.2017.