Facts of the Case:

In this case, the applicant is engaged in the manufacture and supply of various types of tea and instant premix tea. The applicant markets Black Tea, CTC Leaf Tea, Green Tea, Herbal Tea, and Flavoured Tea under different HSN codes attracting 5% GST, while its Instant Premix Masala Tea (HSN 21012010) attracts 5% GST (w.e.f. 22.09.2025; earlier 18%). As a marketing strategy, the applicant proposes to bundle small quantities of instant premix tea sachets with several of its tea products as an introductory offer. The quantity of premix sachets varies across products (e.g., 10 sachets per carton or 2 sachets from a box of 10).

These bundled supplies would be sold for a single price of the principal tea product. The applicant contends that tea is the predominant element, and premix tea is merely an ancillary promotional item, making the bundle a composite supply.

Accordingly, the applicant sought an Advance Ruling on whether such supplies are “Composite Supply” or “Mixed Supply,” what GST rate would apply, and which HSN code should be declared.

Issue:

Whether the applicant’s supply of premix tea sachets bundled with various tea products for a single price, as part of an introductory marketing scheme, would qualify as a “composite supply” under Section 2(30) of the CGST Act, or as a “mixed supply” under Section 2(74). The further question was what GST rate and HSN classification would apply to such bundled supplies, particularly considering that the premix tea (HSN 2101) historically carried a higher tax rate than the teas under HSN 0902.

Held that:

The Authority examined the CBIC indicators for natural bundling and noted that customers do not ordinarily expect premix tea to be bundled with regular tea products, nor is such bundling prevalent in the industry. The premix tea sachets are not ancillary or essential to the use or enjoyment of black tea, green tea, or herbal tea. Further, the bundling was adopted purely as a promotional measure and not as a natural feature of trade in tea products. Therefore, the supply fails the natural bundling test.

Having ruled out composite supply, the AAR held that the proposed combination satisfies all conditions of a mixed supply: (i) two or more individual supplies made together, (ii) sold for a single price, (iii) not naturally bundled, and (iv) the items are independent and normally sold separately. Hence, the supply shall be treated as a mixed supply under Section 2(74).

In terms of taxability, as per Section 8(b) of the CGST Act, a mixed supply is taxable at the rate applicable to the item attracting the highest rate of GST in the bundle. Although premix tea historically attracted 18% GST, it stood reduced to 5% GST wef 22.09.2025, bringing it in line with the GST rate for all other tea products involved. The AAR, therefore, held that the entire mixed supply would attract 5% GST.

On the question of HSN code, the Authority acknowledged that the law mandates classification under the HSN of the item with the highest GST rate in the mixed supply. However, since all items being supplied now fall under a uniform GST rate of 5%, the AAR held that any of the relevant HSN codes may be used, as the CGST Act does not prescribe a specific rule where multiple supplies in a mixed supply bear the same rate.

The AAR held that the proposed supply does not qualify as a composite supply, since the essential requirement of being “naturally bundled in the ordinary course of business” was absent. Accordingly, the AAR ruled that all eight supply combinations constitute a mixed supply, taxable at 5% GST, and that any of the applicable HSN codes may be adopted.

Case Name: In Re: M/s Jivraj Tea International Pvt. Ltd. dated 04.12.2025

To read the complete judgement 2025 Taxo.online 3268