Section 2(30)

“composite supply” means a supply

made by a taxable person to a recipient

consisting of two or more taxable supplies of goods or/and 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;

Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;

Refer Section 2(90) for meaning of “principal supply”

Ex

When a consumer buys a television set and he also gets mandatory warranty and a maintenance contract with the TV, this supply is a composite supply.

Supply of TV is the principal supply, warranty and maintenance services are ancillary.

Ex

A travel ticket from Mumbai to Delhi may include service of food being served on board, free insurance, and the use of airport lounge.

Transportation of passenger, constitutes the pre-dominant element of the composite supply, and is treated as the principal supply and all other supplies are ancillary.

Ex

Poshaak Manufacturers entered into a contract with Cheeku Ltd. for supply of readymade shirts packed in designer boxes at Cheeku Ltd.’s outlet. Further, Poshaak Manufacturers would also get them insured during transit. In this case, supply of goods, packing materials, transport & insurance is a composite supply wherein supply of goods is principal supply.

Whether the services are bundled in the ordinary course of business, would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below:

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The perception of the consumer or the service recipient –

If large numberof service recipient of such bundle of services reasonably expect such servicesto be provided as a package, then such a package could be treated asnaturally bundled in the ordinary course of business.

Ex-Mobile phone is always sold with battery.

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Majority of service providers in a particular area of business provide similar bundle of services.

Ex, bundle of catering on board and transport by air is a bundle offered by a majority of airlines.

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The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business.

If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service.

For example, service of stay in a hotel is often combined with provision of breakfast and dinner provided free of cost during the stay. Such service is anancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business.

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Other illustrative indicators, not determinative but indicative of bundling of services in the ordinary course of business are:

The elements are normally advertised as a package.

The different elements are not available separately.

The different elements are integral to one overall supply. If one or more is removed, the nature of the supply would be affected