Section 8 - Tax liability on composite and mixed supplies of CGST ACT, 2017

This section removes the difficulty in determining and deciding tax liability on supplies which are composite in nature.

For example, suppose a company has supplied a machine along with installation services. Here confusion arises whether it is a sale of machine or installation of machine. May be this is a lesser complex example, but more complex transactions can refer this section to overcome difficulty of deciding rate of tax.

Section specifies that tax liability should be arrived as:

   (a) a composite supply comprising two or more supplies, one of which is a
         principal supply, shall be treated as a supply of such principal supply; and
  (b) a mixed supply comprising two or more supplies shall be treated as a supply
        of that particular supply which attracts the highest rate of tax.

Explanation:

1. Where your supply consist of 2 or more supplies, take above example, the principal supply should be considered as supply. In our example you can treat supply of machine as principal supply without which the whole transaction is not possible.
2. And in a mixed supply of two or more supplies, supply attracting highest rate should be considered.

In my opinion, first preference is principal supply and second is to rate of tax. If you composite supply has a principal supply, in our example it was machine, then you should consider machine as a supply. Whole supply including installation should form part of supply of machine and taxed accordingly.

In case principal supply is not identifiable to complex nature of transaction, then supply that attracts highest rate of tax should be considered.

an example of mixed supply is 

1. a bouquet consists of fruits and chocolates 

         in this case fruits having no tax liability because there is no tax on perishable goods but chocolates covers tax liability. so we treat tax rate of chocolates as final rate because as per provisions of mixed supply highest tax rate will be the principal tax rate of goods, so tax rate of chocolates is final rate

E way bill required on composite bill