Composite supply can be summarized in 3 points:

1. It is a supply of one or more taxable goods or services or both, in any combination by a registered person to a recipient.
2. The goods are naturally bundled and supplied in conjunction with each other (in the same bill) in the ordinary course of business.
3. One of the goods can be distinguished as a Principal supply, the rest become composite supply. This means that the sale of the other goods is only meaningful, when supplied with a principal goods.

Clarification:

Lets say Mr. A is a manufacturer who sells Air conditioners along with freight, insurance and Installation to a wholesale dealer.

Here, frieght and insurance is a composite supply and supply of goods is a principal supply.

This is because sale of transport and insurance has no meaning on their own unless there is a principal supply of goods.

How does GST work in a composite supply?

Continuing our discussion of the example above, it is evident that the principal supply would be that of the AC (rate 28%) and freight (same as the goods, 28%) and insurance services (18%) are composite supplies as they are purely incidental to the supply of the AC.

And since the AC is the principal supply, the rate of GST would be the rate on the AC, this rate will be used to calculate the amount of tax for the entire value of the sale.

Tax payable = Total sale value * GST tax rate applicable.

Where,

• Total Sale value = (price of AC + Price of transportation + Insurance + Installation)
• GST tax Rate Applicable = Rate of AC . (GST is 28% as on 15th June, 2018, HSN 8415)