How Defined Terms in the CGST Act Decide Liability, Rate and Credit
This article takes the main defined terms of the CGST Act, 2017 and shows how each decides whether GST applies, who pays, at what rate and whether credit is available.
The topic matters now because the rate structure was recast from 22 September 2025 on the 56th GST Council recommendations, around 5% and 18% with a special 40% rate for specified goods, and because retrospective amendment has shown that a judicial reading of a credit restriction can be reversed by Parliament. The questions below are answered in the order in which practitioners most often meet them.
Q1. How is a bundle classified as composite or mixed supply?
Section 2(30) defines a composite supply as two or more taxable supplies that are naturally bundled and supplied together in the ordinary course of business, one of which is the principal supply (Section 2(90)). Under Section 8(a) the whole is treated as a supply of the principal supply, taking its rate.
Section 2(74) defines a mixed supply as two or more individual supplies made together for a single price that do not form a composite supply. Under Section 8(b) the whole is taxed at the highest rate applicable to any component.
The Act gives no mechanical test for "naturally bundled". It is a question of fact. Relevant factors include industry practice, customer expectation, whether the components are ordinarily available separately, whether one element is ancillary, how the package is marketed and the commercial identity of the predominant component. Similar bundles can therefore be decided differently by adjudicating and advance-ruling authorities.
The Supreme Court in Union of India v. Mohit Minerals Pvt. Ltd., (2022) 10 SCC 700, decided 19 May 2022, struck down a separate IGST levy on ocean freight in CIF imports because tax was already payable on the composite import transaction that included freight, applying the composite supply principle of Section 8.
Illustration (hypothetical). A vendor sells 40 desktops with pre-loaded software, installation and one year of on-site maintenance for Rs 36,00,000, all exclusive of GST, at an assumed rate of 18%. If the package is composite with the desktops as principal supply, GST is 18% of Rs 36,00,000, i.e. Rs 6,48,000. Installation is readily treated as ancillary. A maintenance contract that can be bought independently needs closer scrutiny, and the answer should rest on the agreement and invoicing, not on one invoice line.