What is a composite supply?
When two or more goods and/or services are combined to make a bundle, it is known as a composite supply. The composite supply includes a main or principal component which is essential to the purpose of the bundle.
What are the requirements for a composite supply?
For any supply to be considered a composite supply, it should meet the following conditions:
- The supply should be a combination of two or more goods/services that are bundled together and cannot be sold separately.
- The supplier should not charge separate amounts for individual items.
- A single supplier should provide all components of the supply.
Examples of composite supply
An airline service includes the cost of in-flight refreshments along with your transportation ticket. It wouldn’t make sense to separate the bundle and just buy the food without the air ticket. Therefore, the air ticket is the principal supply.
A 5-star hotel in Dubai provides breakfast, a swimming pool, and spa services along with your hotel room. You can use all of the other services only if you stay in the hotel. Therefore, this is a composite supply, and it cannot be sold separately. The accommodation is the principal supply, and the other components of the package are dependent supplies.