Composite Supply vs Mixed Supply

[prakash kumar]

Dear Professional Colleagues,

I want to raise a practical issue with respect to GST implementation.

We are a manufacturer as well as trader of UPS (Static Converter). We supply battery along with UPS. UPS(Static Convertors) is covered under tarifff Heading 8504, which is taxable under GST at the rate of 18%. While Battery is covered under tariff heading 8506, which is taxable at the rate of 28% under GST.
Whether said supply is composite supply or mixed supply? What will be the rate of tax applicable on said supply?

If it is mixed supply, can we raise separate bill for UPS & Battery? Advice the best possible way.

Thank you for your valuable time.

[Govind Gupta]

the question to be asked in context of composite supply whether the items are naturally bundled and one of the item is prominent, it that case the tax rate applicable for prominent item will be applicable, in my view, mixed supply will be one when many items are of different nature and tax rates mixed and supplied as a package which is not your case,

[Rajagopalan Ranganathan]

Sir,

Section 8 of CGST Act, 2017 stipulates that " the tax liability on 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."

In my opinion supply of UPS is the principal supply and battery is an accessory of UPS. Therefore as per above provision the rate of tax applicable will be that of UPS for both UPS and battery.

[Himansu Sekhar]

You are correct sir.

[KASTURI SETHI]

Both will be charged separately.

[Ganeshan Kalyani]

Better to invoice it separately.

[KASTURI SETHI]

Yes. I agree with Sh.Ganeshan Kalyani, an expert.

[prakash kumar]

Dear all Respected colleagues,

Thank you for your valuable comments.

But, i would like to state one import fact about our products that, value of battery, which is purchased from outside vendors is round 30-40% of total invoice amount. So, battery being significant in terms of value. So, for the sake of classifying under Composite Supply, would it be correct to say that, UPS (which is our manufactured product) is "Principal Supply" and battery (which is also significant) to be "secondary supply"?

Please guide me through.

[MUKUND THAKKAR]

We are a manufacturer as well as trader of UPS (Static Converter). We supply battery along with UPS. UPS(Static Convertors)

your query it self say you are Traders, for getting the advantage of higher tax inward and lower tax out ward will putting you in trouble. so advise given by expert Ganeshji / kasturiji is correct.

[KASTURI SETHI]

Difference between both terms is given in TMI's FAQ which extracted below for convenience:-

Composite supply is a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are bundled in natural course and are supplied in conjunction with each other in the ordinary course of business and where one of which is a principal supply. For example, when a consumer buys a television set and he also gets warranty and a maintenance contract with the TV, this supply is a composite supply. In this example, supply of TV is the principal supply, warranty and maintenance service are ancillary.

Mixed supply is combination of more than one individual supplies of goods or services or any combination thereof made in conjunction with each other for a single price, which can ordinarily be supplied separately. For example, a shopkeeper selling storage water bottles along with refrigerator. Bottles and the refrigerator can easily be priced and sold separately.

In view of the above, your situation conforms to 'mixed supply' and not to 'composite supply'. Hence opinion already given by me, Sh.Ganeshan Kalyani, Sir and supported by Sh.Mukund Thakkar Sir is correct.

[Jhankar Nathvani]

There should some important facts about this matter need to consider:

1) Customer buying UPS System for back up power, that system can not work without battery. Only supply of battery can not give back up power and vice versa.

2) There are some UPS have inside battery, those are imported with Inside battery and IGST applied at the time of import is 18%

3) The UPS need longer back up, connect battery outside the UPS, that is just different version of UPS having battery inside

If there is different HSN code for the UPS with battery inside or battery outside ?

There is no clarification on the schedule of GST about inside battery or outside battery.

The opinion here recall the story of 4 blind discribe elephant, every one is true from one direction but doesn't cover the real fact.

The authentic solution is to put your question before the Advance Ruling Authority of GST, every state have one ARA and raise your question in prescribed form ARA-1, with fees of ₹ 5000, the authentic reply will be in maximum 90 days. ( till that time you do everything at own risk.)

Please use this info also at your own risk, if government also can not take responsibility of their social media replies, who else can ?

[Ramesh Kothari]

If u want save tax and advantage given to party sale ur product on semi knock down basis under different tariff as stated to save tax for ur buyer

get ur product registered accordingly

Ramesh Kothari

[email protected]

AI Summary

Manufacturer Seeks Guidance on GST Classification for UPS and Batteries: Composite or Mixed Supply? A manufacturer and trader of UPS and batteries sought advice on whether their supply should be classified as a composite or mixed supply under GST, impacting the applicable tax rate. The UPS is taxed at 18% and the battery at 28%. Some respondents suggested the supply could be composite, with the UPS as the principal supply, thus applying the lower tax rate to both items. Others recommended invoicing separately to avoid complications. The discussion highlighted the complexity of GST classifications and suggested seeking an Advance Ruling for a definitive answer.