Mixed and composite supply in GST

Published By Avalara India, 31 Aug 2017

Mixed and composite supply in GST

India’s Goods and Services Tax (GST) has multiple rates — seven to be precise. The four main rates are 5, 12, 18, and 28 percent; plus three extreme rates: viz. 28+cess (tobacco, cars, aerated drinks, etc.), 3 (for gold and precious metals), and nil (food grains, etc.).

The classification of an item determines what rate it receives. However, classifying items is often open to interpretation.

Does a car speaker fall under the category of a loudspeaker, i.e., heading 8518 at 18 percent GST? Or would it fall under automobile parts, i.e., heading 8708 at 28 percent? In a B2B supply, it would not matter much, as the buyer would get credit for all taxes paid to the supplier. However, when you and I go to an auto accessories shop to replace a faulty speaker in our car, the rate difference would matter to us.

Therefore, vendors should use care when determining the appropriate classification and corresponding tax rate of the items they sell.

Combined supplies pose a problem

Quite often goods are packed and sold together, creating challenges. For example:

  • A pack of festival sweets may have candies as well as chocolates, which would attract different GST rates.

  • A manufacturer may sell a car to a dealer and arrange its transport. Should the car and the transport be taxed separately?

  • I may buy groceries and other items at a mall attracting different rates from nil (food grains) to 28 (perfumes); however, these items may all be included in a single bill.

  • In all the above cases, it is not easy to decide what rate to charge. The authors of the GST law wanted to simplify the problem for us and therefore introduced two......

Read more at : https://www.avalara.com/in/2017/08/28/mixed-composite-supply-gst/