# Composite Supply and Mixed Supply [Section 8]
## Why this matters
When a single transaction bundles two or more supplies (goods, services, or a mix), GST law needs a rule to decide what rate to apply. Section 8 provides that rule by classifying bundled transactions as either Composite Supply or Mixed Supply.
## 1. Composite Supply
A supply is composite when all three conditions are met:
1. There are two or more supplies (goods, services, or both).
2. They are naturally bundled and supplied together in the ordinary course of business.
3. One of the supplies is the principal supply (the predominant element).
Key terms
- Naturally bundled → The combination is normal in that line of business (test: would a customer typically expect to receive these together?).
- Principal supply → The dominant element around which the other supplies are ancillary.
## 2. Mixed Supply
A supply is mixed when:
- Two or more supplies are made together for a single price, and
- It does not qualify as composite supply (i.e., not naturally bundled / no principal supply).
## 3. Tax Treatment — The Decisive Table
| Type | Tax Rate to Apply |
|---|---|
| Composite Supply | Rate applicable on the principal supply |
| Mixed Supply | Highest rate among all supplies in the bundle |
| Separately priced items (not composite) | Respective rate for each item |
## 4. Quick Decision Flow
```
Is there a single price? → No → Tax each item at its own rate
↓ Yes
Are supplies naturally bundled + principal supply identifiable?
↓ Yes → Composite → Rate of principal supply
↓ No → Mixed → Highest rate
```
## 5. Special Circulars
### (a) Printing Industry
| Transaction | Nature | Reason |
|---|---|---|
| Printing books, pamphlets, annual reports, brochures | Supply of Service | Intellectual property (content) dominates |
| Printing napkins, tissues, letterheads, envelopes | Supply of Goods | Paper (physical good) dominates |
### (b) Food & Beverages in Cinemas
| Situation | Treated As |
|---|---|
| F&B sold independent of cinema ticket | Restaurant service |
| F&B bundled with cinema exhibition service | Cinema exhibition service (composite) |
### (c) Tenancy Right (Pagdi System)
- Transfer of tenancy right against tenancy premium = supply of service (taxable). Liability to stamp duty does not change this.
- Service by owner (tenancy premium) → Taxable.
- Exception: If the dwelling is residential and let to an unregistered person (or registered proprietor using it personally), rent is exempt → tenancy premium also Exempt.
- Service by outgoing tenant (surrendering tenancy right) → Taxable.