Tax liability on composite and mixed supplies.

Section 8

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—

• (a) 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; and

• (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

AI Explanation

Understanding Tax Liability for Composite and Mixed Supplies

When it comes to figuring out the tax you owe on composite or mixed supplies, there are specific rules to follow. Let's break it down in simple terms:

Composite Supplies

A composite supply involves two or more different supplies, with one being the primary or main supply. In this case, the entire supply is treated as if it's only the main supply.

Mixed Supplies

For mixed supplies, which also consist of two or more different supplies, the approach is a bit different. The entire supply is considered as the one that has the highest tax rate among all the supplies included.

In simpler words, if you have a package deal with different items (composite supply), the tax is calculated as if you're only buying the main item. For mixed supplies with various items, the tax is based on the item with the highest tax rate. Understanding these rules helps make sense of the tax you owe in different supply scenarios.