Docker Compose V2 not working when building containers from git source (subdir)

[wedla]

Description
I'm working in a project that integrates some services hosted in gitlab via docker-compose. Some of these containers are built using dockerfiles inside subdirectories, as you can see in the screenshot below:

Last week, this was working fine, but I had to update my docker application, and today, when I tried to up the containers, I got the error below:

After a lot of research, I wasn't able to find a solution, but verifying the docker dashboard, I just disabled the following feature:

When I did it, docker-compose version was back to 1.29.2, build 5becea4c, and I was able to continue my work.

This issue is being opened to help people that are suffering the same problem as me (I lost a full afternoon on this issue), and to ask you to fix this, if possible.

Steps to reproduce the issue:

1. docker-compose up -d

Describe the results you received:
I received the following error: "failed to solve: rpc error: code = Unknown desc = failed to solve with frontend dockerfile.v0: failed to read dockerfile: failed to load cache key: subdir not supported yet".

Describe the results you expected:
I expected the containers to be built correctly and without issues.

**Output of docker-compose --version: ***

Docker Compose version v2.0.0-beta.6

Output of docker version:

Docker version 20.10.7, build f0df350

Output of docker context show:

default

Output of docker info:

Client:
 Context:    default
 Debug Mode: false  
 Plugins:
  buildx: Build with BuildKit (Docker Inc., v0.5.1-docker)
  compose: Docker Compose (Docker Inc., v2.0.0-beta.6)
  scan: Docker Scan (Docker Inc., v0.8.0)

Server:
 Containers: 16
  Running: 15
  Paused: 0
  Stopped: 1
 Images: 61
 Server Version: 20.10.7
 Storage Driver: overlay2
  Backing Filesystem: extfs
  Supports d_type: true
  Native Overlay Diff: true
  userxattr: false
 Logging Driver: json-file
 Cgroup Driver: cgroupfs
 Cgroup Version: 1
 Plugins:
  Volume: local
  Network: bridge host ipvlan macvlan null overlay
  Log: awslogs fluentd gcplogs gelf journald json-file local logentries splunk syslog
 Swarm: inactive
 Runtimes: io.containerd.runc.v2 io.containerd.runtime.v1.linux runc
 Default Runtime: runc
 Init Binary: docker-init
 containerd version: d71fcd7d8303cbf684402823e425e9dd2e99285d
 runc version: b9ee9c6314599f1b4a7f497e1f1f856fe433d3b7
 init version: de40ad0
 Security Options:
  seccomp
   Profile: default
 Kernel Version: 5.10.25-linuxkit
 Operating System: Docker Desktop
 OSType: linux
 Architecture: x86_64
 CPUs: 2
 Total Memory: 3.844GiB
 Name: docker-desktop
 ID: JEJC:6KBM:UPYM:LYQG:HMZX:AEW3:SCR7:RCMW:3J4W:3M7G:CWZQ:I7N4
 Docker Root Dir: /var/lib/docker
 Debug Mode: true
  File Descriptors: 165
  Goroutines: 143
  System Time: 2021-07-27T23:02:25.2645562Z
  EventsListeners: 4
 Registry: https://index.docker.io/v1/
 Labels:
 Experimental: false
 Insecure Registries:
  127.0.0.0/8
 Live Restore Enabled: false

Additional environment details (AWS ECS, Azure ACI, local, etc.):

[ndeloof]

This is moby/buildkit#1684
afaict this has been fixed by moby/buildkit#2116, but as a recent change you'll need to wait for engine version to be updated on Docker Desktop