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In GCE documentation it mentions "When computing sustained use discounts for predefined machine types, Compute Engine gives you the maximum available discount using inferred instances. An inferred instance combines multiple, non-overlapping instances in the same zone into a single instance for billing."

But I'd like to know the algorithm to combine those instances, for example, I have multiple projects linking to 1 billing account, does it group the inferred instance by project, or by billing account, or even by admin account?

The sustained use discount is applied to the instance. The inferred instances have to be in the same zone, and will be counted as one single instance.

To answer your question, it is by project and by billing account. In the billing section of the GCP console, you have the option to view your charges by project or by product, or as one single unit.

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