A composite supply means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services 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. For instance, a travel ticket from Mumbai to Delhi may include service of food being served on board, free insurance, use of airport lounge. In this case, transport of passenger, constitutes the pre-dominant element of the composite supply, and is treated as the principal supply and all other supplies are ancillary.
The GST Law lays down the tax liability on a composite or mixed supply in the following manner:
- Composite Supply comprising two or more supplies one of which is a principal supply, shall be treated as supply of such principal supply.
- Mixed Supply comprising two or more supplies, shall be treated as supply of that particular supply which attracts the highest rate of tax.
Source: CBIC Website