gst notes for ipcc icai, Study notes of Tax Legislation and Financial Law

Download gst notes for ipcc icai and more Study notes Tax Legislation and Financial Law in PDF only on Docsity! V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 1 Chapter-1 Introduction of GST Table of Contents S.N. Description Pg.No. No. Illus. Goods and Services Tax Goods and Services Tax 1 2 Total No. of Illustrations 2 4 12 7 19 Students Notes 12 Question
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What is GST (Goods and Service Tax)? Answer GST is a destination based tax and levied at a single point at the time of consumption of goods or services by the ultimate consumer. GST is based on the principle of value added tax. GST law emphasizes on voluntary compliance and on accounts based reporting and monitoring system. It is a comprehensive levy and envisages tax collection on both goods and services at the same rate. Internationally, GST was first introduced in France and now more than 160 countries have introduced GST. Most of the countries, depending on their own socio-economic formation, have introduced National level GST or Dual GST. GOODS & SERVICES TAX 1. 1 In tr od uc ti on o f G S T C h ap . 1 Question
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List the taxes to be subsumed in GST? (MTP –ICAI) Answer : Question
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What are the taxes that will continue post GST? Answer : The taxes that will continue after GST are a. Basic Customs Duty b. Export Duties c. Stamp Duties d. Electricity Duties e.Taxes on professions, trades, callings and employments Question
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Explain the concept of 'Dual GST' (Nov 17 – CA final) Answer : India has adopted a dual GST which is imposed concurrently by the Centre and States, i.e. Centre and States simultaneously tax goods and services. Centre has the power to tax intra-State sales &States are empowered to tax services. GST extends to whole of India including the State of Jammu and Kashmir. Question
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What does CGST/SGST/IGST mean? Answer : CGST : CGST stands for Central Goods & Service tax, it is levied & collected by the central government. SGST : SGST stands for State Goods & Service tax, it is levied & collected by the state government. IGST : IGST stands for Integrated Goods & Service tax, it is levied & collected both by the central government & state government of respective states. It is basically charged on inter-state supply of goods or services. Central levies to be subsumed • Central Excise Duty & Additional Excise Duties • Service Tax • Excise Duty under Medicinal & Toilet Preparation Act • CVD & Special CVD • Central Sales Tax • Surcharges and Cesses in so far as they relate to supply of goods & services State levies to subsumed • State surcharges and cesses in so far as they relate to supply of goods & services • Entertainment Tax (except those levied by local bodies) • Tax on lottery, betting and gambling • Entry Tax (All Forms) & Purchase Tax • VAT/ Sales tax • Luxury Tax • Taxes on advertisements Students Notes V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 5 Question
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What does Inward Supply mean in GST? Answer Inward Supply in relation to a person shall mean receipt of goods or services or both whether by purchase, acquisition or both whether by purchase, acquisition or any other means with or without consideration. Question
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What does Outward Supply mean in GST? Answer Outward supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease, or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business. Question
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Bring out the salient features of cross utilization of Input Tax Credit (ITC) under the GST law? (Nov 17 – CA final) Answer Input Tax Credit (ITC) of CGST and SGST/UTGST is available throughout the supply chain, Ü but cross utilization of credit of CGST and SGST/UTGST is not possible, i.e. CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of CGST. Ü However, cross utilization is allowed between CGST/SGST/UTGST and IGST, i.e. credit of IGST can be utilized for the payment of CGST/SGST/UTGST and viceversa. Question
16 Which states have been categorized as special category states under GST? Answer Special provision in GST have been made with respect to states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand. 1. 4 In tr od uc ti on o f G S T C h ap . 1 Students Notes 16 1. 5 In tr od uc ti on o f G S T C h ap . 1 Chapter-2 Charge of Tax & Application of CGST & IGST Laws V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 7 Table of Contents S.N. Description Pg.No. No. Illus. Applicability of GST Law Levy of GST - Sec 9(cgst) & Sec 5 (igst) Sec 7 : Supply - Meaning Person, Supplier & Recipient Supply in the Course or Furtherance Business Goods or Service Under GST Works Contract Under GST Consideration for Supply Schedule - I : Deemed supply without consideration Transfer of Business Asset Supply to related person or Distinct person Supply between principle and Agent Schedule II : Activity to be treated as supply of goods or supply of services Schedule III : Activity not treated as Supply Import of Services Composite and Mixed Supply 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Total No. of Illustrations 8 8 10 12 13 15 16 18 19 20 20 21 21 23 24 25 3 7 7 5 4 3 4 4 1 1 4 1 4 3 4 4 59 Students Notes 110 SEC 7 : SUPPLY - MEANING Question
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When does a particular activity attract GST? Explain the scope? Answer As per section 9 of CGST act, GST is leviable on supply of goods / services or both As per section 7 of CGST act, supply includes (1) All forms of supply of goods or services or both Ü such as sale, transfer, barter, exchange, licence, rental, lease, or disposal Ü made or agreed to be made for a consideration by a person Ü in the course or furtherance of business (2) import of services for a consideration whether or not in course or furtherance of business (3) the activities specified in Schedule I, made or agreed to be made without a consideration & (4) the activities to be treated as supply of goods or supply of services as referred in Schedule II Thus, all the activities specified above falling under the scope of supply shall attract GST excluding those activities as specified in Schedule III. Question
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Mention the necessary elements that shall constitute supply under CGST Act? Answer For any activity to qualify as a 'supply', the following elements are required to be satisfied, i.e. – i) the activity involves supply of goods or services or both ii) the supply is for a consideration unless otherwise specifically provided under Schedule I iii) the supply is made in the course or furtherance of business iv) the supply is made in the taxable territory Question
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State the types of supplies under the GST law? Answer The different types of supplies under GST law are as follows:- i) Taxable & exempt supplies ii) Inter-state & Intra-state supplies iii) Composite & mixed supplies iv) Zero rated supplies Question
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Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods? (ICAI Material) Answer Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II(1)(b) of the CGST Act. In some cases, possession may be transferred immediately but title may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods. 2. 3 C ha rg e of T ax C h ap . 2 Students Notes V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 11 2. 1 Question
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Differentiate between a taxable supply & non-taxable supply under GST? Answer Taxable Supply As per section 2(108) of CGST Act, means supply of goods or services or both which is leviable to GST under this act Falls under the purview of 'Supply' as per section 7 of CGST Act. For eg:- Supply of Gold jewellery or Silver Articles Non-Taxable Supply As per section 2(78) of CGST Act, means supply of goods or services or both which is not leviable to GST under this act or under Integrated Goods & Service Tax Act. Does not fall under the purview of 'Supply' as per section 7 of CGST act. For eg:- Supply of Petrol or Diesel Question
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What is the difference in between 'Nil rated', 'taxable at 0%' supply of goods and services? Answer There exist a difference between a Nil rated supply and a Zero rated supply as per GST law 'Nil rated supply' means a supply of Goods or Services which has Nil rate in tariff or exempt by notification. 'Zero rated supplies' means a supply of Goods or Services for export or to SEZ units [Sec 16 of IGST] Question
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Discuss whether the following activities constitute 'Supply' in accordance with section 7 of CGST Act (i) Mr. Raj sold electronic gadgets to XYZ Co. (ii) Arya pvt. ltd. entered into a hire purchase agreement with AB pvt. ltd. for supply of a machine unit. (iii) Asha purchase an LED TV of 24 inch from Sony electronics store and in return gave away her old TV. (iv) VB associates a CA firm appointed Mr. Urja as an interior decorator to design it's office outlet in exchange for such service, VB associates rendered tax compliance services to Mr. Urja. (v) M/s Bharat electronics disposed scrap part of electric unit to a scrap dealer. Answer i) Yes, as term sale is included in the expression supply ii) Yes, as hire purchase involves transfer of title in goods as per Schedule II of section 7, shall be classified as supply of goods iii) Yes, as the above supply falls under barter transaction which is also included under the scope of supply iv) Yes, it is a form of exchange which is included under the scope of supply v) If the disposal is in course or furtherance of business of M/s Bharat electronics then it shall be considered as a supply. 2. 4 C ha rg e of T ax C h ap . 2 Students Notes 112 PERSON, SUPPLIER & RECIPIENT Question
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. Define the following terms I) Person ii) Supplier iii) Recipient Answer (i) As per section 2(84) of CGST Act, 2017 , “person” includes— (a) an individual (b) a Hindu Undivided Family (c) a company (d) a firm (e) a Limited Liability Partnership (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (h) any body corporate incorporated by or under the laws of a country outside India (i) a co-operative society registered under any law relating to co-operative societies (j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860 (m) trust; and (n) every artificial juridical person, not falling within any of the above ii) As per section As per section 2(105) of CGST Act, the term 'Supplier' in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied iii)As per section 2(93) of CGST Act, “recipient” of supply of goods or services or both, means— (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered And any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied. Question
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CASE
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If Mr A pays consideration to Mr.Yash and Mr.Yash performs surgical operations on Mr R, determine the supplier & recipient for the given case in accordance with GST law? Would your answer differ if consideration is paid by Mr. A on the behalf of Mr. R Answer : Ü As per section 2(93) of CGST Act, where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration so in given case Service Recipient is Mr A Ü However, if consideration is payable by Mr R but same is paid by Mr A on behalf of Mr R then, service recipient – Mr R. Ü As per section 2(105) of CGST Act, Supplier – MrYash 2. 5 C ha rg e of T ax C h ap . 2 Students Notes V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 15 Question
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Define the following term as in accordance with GST I) Goods ii) Services Answer As per section 2(52) of CGST Act, 2017 as under:- I) Goods:- “Goods” means every kind of movable property – Ü Other than – F money & F securities Ü but includes – F actionable claim, F growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. ii) As per section 2(102) of CGST Act, 2017 “services” means Ü anything other than goods, money and securities Ü but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. Goods or Service Under GST Question
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State whether the following activities will be considered as a supply of service in relation to 'Money' in accordance with GST Act i) Mr A borrows an amount of ` 1, 50,000 from one of his relative Mr Q and agrees to repay the entire amount after a year ii) M/s Raj enterprises applied for loan from SBI Bank against which a processing fees and interest is charged by the bank iii) Mr H exchanged INR against purchase of US $ for which a commission was charged Answer I) No, the activity of borrowing from a relative is without any charge of interest and hence it will be considered as merely a transaction in money ii) Yes, the activity of borrowing loan amount for which a consideration in form of processing fee has been charged by SBI shall be considered as a supply of service. iII) Yes, the activity of exchange of currency for which a commission is charged will be considered as supply of service. Question
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CBC ltd, an NBFC transfers a secured debt to Sam pvt ltd. Does it qualify as supply? Answer Actionable claims are covered in the definition of goods. However, Schedule III of CGST Act excludes actionable claims other than lottery, gambling and betting from the scope of supply but as secured debts do not fall under the definition of actionable claim. The same will constitute transaction in money. However, if a service fee or processing fee or any other charges are collected in the course of such transfer of debt then the same will be a supply leviable to GST. 2. 8 C ha rg e of T ax C h ap . 2 Students Notes 116 Question
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Define the term 'Works Contract’ Answer As per section 2(119) of CGST Act, “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning Ü of any immovable property Ü wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract Question
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CASE
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Aspire Ltd enters into contract with Beta Ltd for execution of works contract for ` 50,00,000 excluding taxes for following activities pertaining to construction of a complex. Determine whether the following activities fall under the ambit of 'works contract' i) Erection & installation of structural designs to the complex which involved material. ii) Fabrication works relating to the structure of complex no material is involved. iii) Assembling of units pertaining to movable property which involved material and goods. iv) Tiling & painting work of the entire building which involved material. Answer As per section 2(119) of CGST Act, defining the term works contract. Only if the activities fall under the definition it shall be considered as a works contract. i) Yes, the given activity is in relation to an immovable property thus qualifies as a works contract ii) No, eventhough the given activity of fabrication is in relation to immovable property thus it does not qualifies as works contract because material is not involved. iii) No, the activity of assembling units will not qualify as works contract as it is relation to a movable property. iv) Yes, the given activity is in relation to building which is immovable property & thus qualifies as works contract. Works Contract Under GST 2. 9 C ha rg e of T ax C h ap . 2 Students Notes V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 17 Question
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Shambhu Pvt. Ltd. was awarded contract in Nov.2018 for moving flooring & wall tiling services in resptect of building located in Delhi by Nath Ltd. As per terms of contract, Shambhu Pvt. Ltd. was to provide all the required material for execution of contract. Following are the particulars given by Shambhu Pvt. Ltd.? Description Inward Supply Value Rate Outward Supply Value Rate Granite used Cement used Other material Labour & other services 3,00,000 5,00,000 4,00,000 6,00,000 28% 28% 18% --- 4,00,000 6,00,000 5,00,000 7,00,000 28% 28% 18% 18% Determine GST Liability of Shambhu Pvt. Ltd. if (i) Separate charges made for supply of material services (ii) Supplied as works contract.@18% 2. 10 C ha rg e of T ax C h ap . 2 Calculation of GST liability if Separate charges is made for supplier, material & Service Particular Value Tax (`) CGST SGST Granite used Cement used Other material Labour & other services Total GST payable (a) 4,00,000 6,00,000 5,00,000 7,00,000 56,000 84,000 45,000 63,000 2,48,000 56,000 84,000 45,000 63,000 2,48,000 Less ITC on Inward Supplier Granite used Cement used Other material Labour & other services Total ITC payable (b) Net GST payable (a) - (b) - 3,00,000 5,00,000 4,00,000 6,00,000 - 42,000 70,000 36,000 - 1,48,000 1,00,000 - 42,000 70,000 36,000 - 1,48,000 1,00,000 Calculation of GST liability if supplied as a works contract Particular Value Tax (`) CGST SGST Works Contract @ 18% Total GST payable (a) 22,00,000 1,98,000 1,98,000 1,98,000 1,98,000 Less ITC on Inward Supplier Granite used Cement used Other material Labour & other services Total ITC payable (b) Net GST payable (a) - (b) - 3,00,000 5,00,000 4,00,000 6,00,000 - 42,000 70,000 36,000 - 1,48,000 50,000 - 42,000 70,000 36,000 - 1,48,000 50,000 Students Notes 120 2. 13 C ha rg e of T ax C h ap . 2 Question
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Whether transfer of goods to another branch located outside the State is taxable? What would be your opinion on taxability of goods are transfer to another branch of same state. Answer In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of para 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that, supply of goods to a branch / unit located within the same State is not liable to GST if such branch is not separately registered. In case branch in a same state having separate registration then it would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4). Question
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Whether gifts given by employer to employee will also qualify as supply? Answer As per definition of related person it includes employer & employee as related person. As per Sch I [Sec 7 (1) (c)] para 2 any supply of goods or services to related person shall qualify as a supply when it is made in the course or furtherance of business. Also as per proviso the gift value not exceeding ` 50,000 in a financial year by an employer to employee shall be treated as supply. Question
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VB associates & Co a CA firm donated old laptops to charitable schools on account of renovation of office. The firm had taken input tax credit on the laptops so donated. Does it qualify as a supply? Answer As per section 7(1)(c) read with Schedule I of CGST Act,2017, Permanent transfer or disposal of business assets where input tax credit has been availed shall be treated as supply even if made without consideration. Hence donation of old laptops to charitable schools shall qualify as supply since ITC has been availed by VB associates & co. Question
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Daksh gold pvt ltd. On occasion of Diwali distributes gift hamper to its employee worth ̀ 3, 00,000. Does it qualify as supply? Would your answer be different if gifts of ̀ 42,000 have been given to a employee? Answer As per section 7(1) (c) read with Schedule I of CGST Act, 2017, Supply of goods or services between related persons id treated as supply even if it is without consideration. As per explanation to section 15 of CGST Act 2017, persons shall be deemed to be as “related persons” if such persons are employer and employee. Thus, Diwali gifts to employee worth ` 3,00,000, will qualify as supply and such supply would be leviable to GST. If gift of ` 42,000 is given instead of ` 3,00,000 , the same will not qualify as supply since it has been specifically provided that gifts not exceeding ` 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. Transfer of Business Asset Supply to related person or Distinct person Students Notes V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 21 2. 14 C ha rg e of T ax C h ap . 2 Question
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Disha Automobiles pvt ltd. Engages AS motors ltd , as an agent to sell cars on its behalf. For the purpose, Disha Automobiles pvt ltd has supplied 150 cars to the showroom of AS motors ltd. Located in Gujarat. Does it qualify as supply? Answer As per section 7(1)(c) read with Schedule I CGST Act, 2017, Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal shall be treated as supply even if made without consideration. In view of the same supply of cars by Disha Automobiles pvt ltd. to AS motors ltd to Disha Automobiles will qualify as supply. Question
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VS ltd. Provides tax consultancy services without any consideration to SK ltd in which VS ltd holds 30% shares. The said consultancy has been provided for the benefit of entire group. Does it qualify as a supply? Answer As per section 7(1)(c) read with Schedule I of CGST Act 2017, Supply of goods or services between related persons is treated as supply even if it is without consideration. As per explanation to section 15 of CGST Act 2017, persons shall be deemed to be as “related persons” if any person directly or indirectly owns, controls, the other. Normally if any person holds more than 50% shareholding in another then control is proved between both of them. In the given case merely holding 30% of share by VS ltd in SK ltd cannot be treated as related person. Hence we can say that service is provided without consideration & it does not qualify as supply u/s 7 of CGST Act. Supply between principle and Agent Question
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Is it important to distinguish between supply of goods and services? Answer Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of supply of services respectively; similarly separate provisions have been specified for ascertaining place of supply of goods and place of supply of services. Further, the rate of tax applicable to supply of goods and supply of services may be different. Accordingly, it is important to distinguish whether a particular transaction involves supply of goods or supply of services. Schedule II : Activity to be treated as supply of goods or supply of services Question
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Mr S is the owner of a truck valued at ̀ 7, 00,000/- , He transfers the right to operate the truck to Mr Y for a consideration but the ownership of the truck is not transferred. Determine whether it will be considered as a supply? Answer As per section 7(1)(d) read with Schedule II of CGST Act,2017, Any transfer of rights in goods without transfer of title thereof shall be classified as supply of service. Students Notes 122 2. 15 C ha rg e of T ax C h ap . 2 Question
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Classify following activities as a supply of goods or services as per Schedule- II i) Mr Suraj enters into a contract with Mr Vishal to rent out his property for commercial purpose ii) M/s Swadh enterprises provides catering services on occasions such as party, seminars, conference etc.. iii) M/s XYZ pvt ltd transferred stock of raw materials from its unit in Pune to one of its branch located in Nagpur iv) Mr X provided transportation facility for a deceased person in relation to performance of funeral rights v) M/s Nirmitee developers undertakes a contract of fabrication works in office of a complex building Answer The above activities are in relation to goods or services or both but in order to be classified as a 'Supply' it must be included in the scope of supply as per section 7 of CGST Act. i) Yes it is a supply, As per section 7(1)(d) read with Schedule II of CGST Act, Renting of immovable property has been classified as a 'supply of service'. ii) Yes it is a supply, As per section 7(1)(d) read with Schedule II of CGST Act, Supply of food or any other article for human consumption where it is for a consideration is classified as a 'Composite Supply'. iii) No, if goods are transferred from one unit to another unit in the same state of same business entity having same registration number, then it would not be considered as supply under section 7 of CGST Act. iv) No, As per section 7(2)(a) read with Schedule III of CGST Act, Services of funeral, burial, crematorium or mortuary including transportation of deceased shall neither be treated as 'supply of goods' nor a 'supply of services' v) Yes it is a supply, As per section 7(1) (d) read with Schedule II & definition of 'Works Contract' under section 2(119) of CGST Act fabrication works relating to an immovable property shall be classified as a 'supply of service'. Question
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Mr Raju & Mr Aditya are running a partnership firm and having goods S & T in stock. Mr Raju & Mr Aditya decide to dissolve the partnership and the goods S & T are taken over by Mr Raju & Mr Aditya respectively. The business is not continued further. Whether such takeover of stock be considered as supply? Answer As per section 7(1)(d) read with clause 4(c) of Schedule II of CGST Act, the clause provides that where any person ceases to be a taxable person, any goods forming a part of asset of any business shall be deemed to be supplied by him in the course or furtherance of business. Provided that it shall not be treated as supply if it falls under the following exceptions: i) the business is transferred as a going concern to another person or ii) the business is carried on by a personal representative who is deemed to be a taxable person In both the above cases, the business is continued. Therefore, it will not be considered as supply of goods. In the given case partnership firm is dissolved & ceases to be taxable person also, the business is not continued further hence stock of S & T is to be treated as supply & liable to GST. Students Notes V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 25 2. 18 C ha rg e of T ax C h ap . 2 Question
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Determine whether the following supplies amount to composite supplies: (a) A hotel provides 4 days-3 nights package wherein the facility of breakfast and dinner is provided along with the room accommodation. (b) A toothpaste company has offered the scheme of free toothbrush along with the toothpaste. (ICAI Material Answer Under composite supply, two or more taxable supplies of goods or services or both, or any combination thereof, are naturally bundled and supplied inconjunction with each other, in the ordinary course of business, one of which is a principal supply [Section 2(30) of the CGST Act]. In view of the same, (a) since, supply of breakfast and dinner with the accommodation in the hotel are naturally bundled, said supplies qualify as ‘composite supply’. (b) since supply of toothbrush alongwith the toothpaste are not naturally bundled, said supplies do not qualify as ‘composite supply’. Define the following terms as in accordance with GST Act:- i) Composite supply ii) Mixed supply Answer: As per section 2(30) of CGST Act, “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; Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; As per section 2 (74) “mixed supply” means 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. Illustration — 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. Question : 56 Question
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Nirvana Manufacturers entered into a contract with XYZ Ltd. for supply of readymade shirts packed in designer boxes at XYZ Ltd.’ outlet. Further, Nirvana Manufactures would also get them insured during transit. Determine nature of supply? Answer In this case, supply of goods, packing materials, transport & insurance is a composite supply wherein supply of goods is principal supply. In this case, entire transaction would be taxed as ‘supply of goods’. Composite & Mixed Supply Students Notes 126 2. 19 C ha rg e of T ax C h ap . 2 Question
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Sagar Ltd. supplying a kit which contains a tie (12%), a watch(28%), a wallet (28%), and a pen (12%), as a combo, for ̀ 4,500. Tie, watch, wallet, and pen are bundled as a kit. The kit is supplied for a single price. Determine nature of supply? Answer Each of the goods in the package have individal identity and can be supplied separately, but are deliberately supplied conjointly for a single conjointly for a single consolidated price. Hence, the supply would constitute a mixed supply, as per section 2(74). The supply of a tie does not naturally necessitate the supply of other elements (watch, wallet, pen) and vice versa. As per section 8(b), tax rates applicable in case of mixed supply would be the rate of tax attributable to that one supply (goods, or services) which suffers the highest rate of tax from amongst the supplies forming part of the mixed supply. Therefore, entire package will be chargeable to 28% GST.