When the seller gives more than one product or service to the customer as a single transaction and each of the components provided complements the use of other, is termed as single composite supply.
In a single composite supply transaction, there is a main product or service which is actually sorted by the customer; it is called as principal supply. Principal supply is provided along with ancillary products which are useful or might be necessary or might help in making better use of the principal product or service.
Also, a single composite supply is triggered when it is not possible to separate the values, or it would be artificial to separate the values of the individual components of a bundled supply. This might be because the transaction is completed only by connecting various products or services together.
For an example, when you go for car servicing it consists of many things like Filter replacement, light checking, tyre checking, etc. and the servicing is completed only after the completion of each of these supplies and a single fee is charged on it. Therefore, in this case car servicing is a single composite supply.
VAT Treatment in Bahrain to be applied on a single composite supply
In single composite supply where a main service and ancillary supplies are included in it, the VAT treatment in Bahrain is applied for the main supply.
Where the values of supplies cannot be distinguished, then the VAT treatment is to be done, considering the supply as whole. In the above example of car servicing, the VAT treatment to be applied would be analyzed based on the VAT rate which is applicable for car servicing as whole.
When a supplier provides multiple goods or services to the customer and when each of these goods or services so provided can be distinguished. Also, it can be used individually without each other, and then such a supply is called multiple supplies.
In the case of multiple supplies, it is possible to identify the value of individual items. Each component of multiple supplies can be split and used separately. The presence of one component is not necessary for the usage of the other.
For example, a mall provides special combo offer of dry fruits, it includes dates, almonds and cashew nuts altogether for BD 5.250. This is the example of multiple supplies as each of the components of the supply can be separately identified and each of them is not necessary for the use of other.
Even if a single fee is charged for the bundled supply, it is possible to break down this fee and separately identify the value of each of the items.
VAT Treatment in Bahrain to be applied on Multiple Supplies
In multiple supplies, VAT is applied separately on each product or service. In case a single fee is charged for the entire supply, then the fee has to be split and the value of each of the product or service in the supply should be identified. VAT rate to be applied separately on the value of each of the product or service given under multiple supplies.
In the above example of dry fruits, supermarket is liable to separate, BD 5.250 and identify the value of each of the product in the combo offer. Also, the VAT treatment in Bahrain applicable for each of the dry fruits supplied by them as a part of the combo offer should be separately identified and applied.
The case where amount of invoice cannot be split and allocated to each product or service of the multiple supplies separately then the rate of VAT applied on the supply would be the highest rate of VAT applicable after comparing the VAT rate of each supply. That is, if the supply consists of the product with VAT rate 0% and VAT rate 5%, then the VAT rate of 5% should be applied to the total value of the multiple supplies.