Composite Supply Rule: Grated supari, lime, and chewing tobacco in one pouch taxed as chewing tobacco

The delivery of grated supari, lime, and chewing tobacco in a single pouch is classified as a composite supply under the CGST Act, 2017, with chewing tobacco identified as the principal supply. The applicable tax rates are 28% GST (14% CGST + 14% SGST), 160% Compensation Cess, and 10% NCCD. This ruling clarifies that the entire composite supply is treated as a supply of chewing tobacco for taxation purposes.

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Issues Involved
1. Classification of the delivery of grated supari, lime, and chewing tobacco in a single pouch as mixed supply or composite supply under the CGST Act, 2017.
2. Determination of the applicable tax rate for the supply of these items.

Issue-wise Detailed Analysis

1. Classification of the Delivery of Grated Supari, Lime, and Chewing Tobacco

The applicant, an unregistered person in GST, intends to trade grated supari, lime, and chewing tobacco, each packed separately but delivered together in a transparent plastic pouch. The applicant argues that since each item is priced and invoiced separately, the supply should not be classified as a mixed supply under Section 2(74) of the CGST Act, 2017.

Discussion & Findings:

- Composite Supply Definition: As per Section 2(30) of the CGST Act, 2017, a composite supply consists of two or more taxable supplies of goods or services that are naturally bundled and supplied in conjunction with each other, with one being the principal supply.
- Mixed Supply Definition: Section 2(74) of the CGST Act, 2017 defines mixed supply as two or more individual supplies of goods or services made together for a single price that does not constitute a composite supply.

Analysis:

The applicant supplies grated supari, lime, and chewing tobacco together in a single pouch for customer convenience, with each item separately priced and invoiced. The applicant claims this does not constitute a mixed supply. However, the authority finds that these items are typically consumed together, mixed before consumption, and are naturally bundled in the ordinary course of business. Examples include 'mawa' in Gujarat and 'khaini' in other regions, where chewing tobacco is the principal ingredient mixed with supari and lime.

Conclusion:

The authority concludes that the supply of grated supari, lime, and chewing tobacco in a single pouch is a composite supply under Section 2(30) of the CGST Act, 2017, with chewing tobacco being the principal supply.

2. Determination of Applicable Tax Rate

Classification of Individual Items:

- Grated Supari: Classified under Sub-heading No.08028030 as per the Customs Tariff Act, 1975, with a GST rate of 5% (2.5% CGST + 2.5% SGST).
- Chewing Tobacco: Classified under Sub-heading No.24039910, with a GST rate of 28% (14% CGST + 14% SGST) and a compensation cess of 160%. Additionally, a National Calamity Contingent Duty (NCCD) of 10% is applicable.
- Slaked Lime: Classified under Sub-heading No.25222000, with a GST rate of 5% (2.5% CGST + 2.5% SGST).

Tax Liability on Composite Supply:

As per Section 8(a) of the CGST Act, 2017, the tax liability on a composite supply is determined by the principal supply. Since chewing tobacco is the principal supply, the entire composite supply will be treated as a supply of chewing tobacco.

Applicable Tax Rates:

- GST Rate: 28% (14% CGST + 14% SGST) as per Sr.No.15 of Schedule-IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017.
- Compensation Cess: 160% as per Sr.No.26 of Notification No.01/2017-Compensation Cess (Rate) dated 28.06.2017.
- NCCD: 10% as per Section 136 of the Finance Act, 2001.

Ruling

The delivery of grated supari, lime, and chewing tobacco in a single transparent plastic pouch is classified as a composite supply with chewing tobacco as the principal supply. The applicable tax rates are:

- GST: 28% (14% CGST + 14% SGST).
- Compensation Cess: 160%.
- NCCD: 10%.

This ruling ensures that the supply is taxed at the rate applicable to the principal supply, which is chewing tobacco.

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