Diwali gift hampers are a classic example of a mixed supply under GST. They typically contain a variety of items with different GST rates, bundled together for a single price. Understanding the tax treatment helps businesses and gift sellers avoid errors.
The Concept of Mixed Supply
Section 2(74) of the CGST Act defines mixed supply as two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price, where such supply does not constitute a composite supply.
A Diwali gift hamper containing sweets, dry fruits, chocolates, aerated drinks, and maybe a decorative item is not naturally bundled in the ordinary course of business. The items are artificially combined for a festive offering. There is no single principal supply that dominates; each item is independently valuable and usable.
Therefore, it is a mixed supply.
Tax Rate on Mixed Supply
Under Section 8(b) of the CGST Act, a mixed supply is taxed at the highest rate of tax applicable to any of its component supplies.
This is the critical rule. Even if 90% of the hamper's value is in low-tax items, the entire hamper is taxed at the highest rate among all items.
Case Study: A Typical Diwali Hamper
Let's assume a hamper contains:
- Assorted sweets (packaged): 5% GST
- Dry fruits and nuts (mixed): 12% GST
- Chocolates: 18% GST
- Aerated drinks: 28% GST plus compensation cess
The hamper is sold for a single price of Rs 2,500.
Since the hamper is a mixed supply, the entire Rs 2,500 is taxed at the highest rate, which is 28% (aerated drinks), plus applicable cess if the aerated drinks are subject to cess.
GST on Rs 2,500 at 28% = Rs 700. Plus compensation cess on aerated drinks element if applicable. But for the whole supply, the highest rate applies, and cess may also apply based on the item attracting cess.
If the Hamper Did Not Contain 28% Items
If the hamper contains only sweets (5%), dry fruits (12%), and chocolates (18%), the highest rate is 18%. The entire hamper is taxed at 18%.
Input Tax Credit for the Seller
The seller who assembles the hamper and sells it as a mixed supply can claim input tax credit on the individual items purchased, subject to Section 16 and Section 17. The seller charges 28% on the hamper but may have paid only 5%, 12%, 18%, and 28% on inputs. The ITC chain should offset the higher output tax, but the seller's margin and pricing must account for the rate differential.
Corporate Gifting and ITC
If a company buys Diwali gift hampers for employees or clients, the company cannot claim input tax credit on the hampers because gifts are generally blocked under Section 17(5)(h) as goods disposed of by way of gift or free samples. Even if the hamper is a mixed supply and taxed at 28%, the recipient company cannot claim ITC on the gift.
Practical Compliance Steps
- Identify all items in the hamper and their individual GST rates.
- Determine the highest rate among all items.
- Charge GST on the entire hamper at that highest rate.
- Apply compensation cess if any item attracts cess.
- Ensure the invoice description lists the contents but charges a single rate.
- Maintain purchase invoices to support ITC claims.
Common Mistakes
- Charging different rates for different items within the same hamper.
- Applying an average rate or the rate of the majority item.
- Treating the hamper as a composite supply.
- Not accounting for cess on aerated drinks.
- Incorrectly claiming ITC on gifts.
How Anuj Desai & Associates Can Help
We help gift retailers, corporates and e-commerce sellers classify mixed supplies, apply correct GST rates, manage ITC and avoid rate-related disputes.
Contact Anuj Desai & Associates
Email: office@anujdesaiassociates.com
Phone: 9619456656
Website: https://anujdesaiassociates.com
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