GST Basics #3: Who Is a "Taxable Person", and What Are Composite and Mixed Supplies?

Part 3 of our plain-language series finishes the key Section 2 definitions: person, taxable person, and the two kinds of bundled sales — composite and mixed supply — which decide the GST rate when you sell things together.

In the last instalment we saw how the CGST Act defines goods, services, consideration and business. Today we finish the definitions in Section 2 that matter most in daily practice: who the law taxes, and how it treats things sold together as a bundle.

Start with "person", defined in Section 2(84). The word is far wider than an individual human being. It covers individuals, Hindu undivided families, companies, partnership firms, limited liability partnerships, associations of persons, co-operative societies, trusts, local authorities, and central and state governments themselves. If an entity can carry on an activity, GST law almost certainly counts it as a person.

Being a person is not enough to owe tax, though. The law taxes a "taxable person", defined in Section 2(107) as someone who is registered, or who is liable to be registered, under Section 22 or Section 24. Section 22 makes registration compulsory once your turnover crosses the threshold limit, while Section 24 lists categories that must register regardless of turnover, such as those making inter-state taxable supplies or selling through e-commerce operators. We will walk through those registration rules in detail in a later instalment. The point to hold on to now: liability follows registrability — you can be a taxable person even if you have wrongly stayed unregistered.

Next, the two kinds of bundles. A "composite supply", under Section 2(30), is two or more taxable supplies that are naturally bundled and supplied together in the ordinary course of business, where one of them is the principal supply. Think of a machine sold with transport and insurance to your Chennai factory: the machine is the principal supply. Section 8 says the whole bundle is taxed at the rate of that principal supply.

A "mixed supply", under Section 2(74), is the opposite: two or more supplies sold together for a single price that are not naturally bundled — a Diwali hamper with sweets, dry fruits and a soft drink, for instance. Under Section 8, the entire mixed supply is taxed at the rate of whichever item in it carries the highest rate. So how you price and invoice a bundle changes the tax you collect: one consolidated price can push the whole hamper to the highest rate, while separately priced items are each taxed on their own.

What this means for you: before billing any bundled sale, ask whether the items are naturally bundled with one principal item, or just packaged together for a price. The answer decides your rate. The full text of Section 2 is on CBIC's portal at https://taxinformation.cbic.gov.in/content/html/tax_repository/gst/acts/2017_CGST_act/active/chapter1/section2_v1.00.html and the Act can be browsed from https://taxinformation.cbic.gov.in. Next time: Section 7, the meaning of "supply" — the single most important provision in GST.

Topics:GST basicstaxable person GSTcomposite supplymixed supplysection 2 CGST Actperson definition GSTGST rate on bundlesGST registration liabilityGST ChennaiTamil Nadu GSTsection 8 CGST

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