Challenge on Supply of Reagent with equipment is ‘Composite Supply’ or ‘Mixed Supply’: Delhi HC Leaves Issue to Appellate Authority [Read Order]

The petitioner, Ortho Clinical Diagnostics India Pvt. Ltd., engaged in the manufacture and supply of reagents, consumables, and calibrators used for diagnostic testing, challenged an Order-in-Original dated 7 January 2025issued by the GST authorities confirming a total demand of ₹39.82 crore, including IGST, CGST, SGST, interest, and an equivalent penalty.

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According to the impugned order, the Department treated the petitioner’s supplies, comprising both reagents and diagnostic equipment as ‘mixed supplies’ under Section 2(74) of the CGST Act, thereby applying the higher tax rate of 18%.

The petitioner contended that such classification was erroneous and that its transactions amounted to ‘composite supplies’, where reagents and instruments were naturally bundled and supplied in conjunction for diagnostic purposes.

Appearing for the petitioner, Mr. V. Lakshmikumaran contended that the company undertakes two distinct categories of supplies, first, the supply of reagents alone, which are taxable at 5% or 12% depending on their classification, and second, the combined supply of reagents and diagnostic instruments, where the instruments are specifically designed and supplied for use with those reagents.

It was argued that the Department had erroneously treated all transactions as “mixed supplies” under GST, without appreciating the inherent distinction between these two types of supplies.

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The counsel further submitted that even if the Department’s interpretation were to be partially accepted, the higher rate of tax applicable to mixed supplies could only be imposed on the second category of transactions involving combined supplies, and not on the reagents supplied independently.

A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain observed that the core question whether the supply of reagents with instruments constitutes a composite or mixed supply requires factual verification of the nature of contracts, invoices, and the manner in which supplies are made.

The Court noted that the impugned order itself is an appealable order under Section 107 of the CGST Act. It further observed that the writ petition, though initially filed in April 2025, was refiled in September after curing defects, which constituted only a delay in refiling.

Considering the factual complexities, the Court held that the matter ought to be considered by the Appellate Authority, which can assess the evidentiary material and legal submissions comprehensively.

The Delhi High Court accordingly relegated the petitioner to the appellate remedy, permitting the company to file its statutory appeal by 15 November 2025, along with the requisite pre-deposit. The Court directed that if the appeal is filed within the said period, it shall be heard on merits and not dismissed on limitation grounds.

The Appellate Authority has been instructed to provide the petitioner with a personal hearing and pass a reasoned order in accordance with law.

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