Ice Cream Not a Luxury, Chhattisgarh HC urges GST Council for Rate Reevaluation

The Chhattisgarh High Court has ruled that ice cream is not a luxury item and has directed the Goods and Services Tax ( GST ) Council to reconsider its decision to exclude small-scale ice cream manufacturers from the composition scheme. The composition scheme allows businesses to pay tax at a flat rate, which is typically lower than the normal GST rate.

The court's order came in response to a petition filed by the Small Scale Ice Cream Manufacturer Association, which argued that the GST Council's decision to exclude ice cream manufacturers from the composition scheme was arbitrary and discriminatory.

The counsel appearing for the petitioners submitted that the decision of the GST Council with regard to the exclusion of Ice Cream Manufacturers from the purview of composite levy of tax is erroneous and illegal.

It was further added that there is no reason assigned by the Council for the inclusion of Ice Cream Manufacturers in the negative list. He also submitted that the Council lost sight of the fact that all Ice Creams are milk-based and even Ice Candy is also termed ‘Ice Cream’. He contended that the Council in an unjust, illegal and arbitrary manner has treated the Ice Cream at par with Pan Masala and Tobacco products.

The Bench noted that, “From a perusal of the resolution passed by the GST Council, it is evident that the goods and services have been divided into 05 Tax slabs for collection of the tax, that is (i) 0%, (ii) 5%, (iii) 12%, (iv) 18% and (v) 28%.”

“It was discussed in the meeting that the Small Scale Ice Cream Industries have been put out of the composition scheme and the Manufacturers have been put under the category of 18% of the GST Scheme. It was also discussed that except for the big brands of Ice Cream Industries, 80-90% of Ice Cream Industries fall under the Small Scale Industries and are low in their turnover and transaction business”, the bench further noted.

The Bench of Justice Rakesh Mohan Pandey noted that, “From a perusal of the decision taken by the Council in the meeting, it appears that no reason has been assigned by the Council to exclude the Ice Cream Manufacturers from the benefit of Section 10(1) of the GST Act. The Council ought to have taken into consideration the socio-political effect while putting the Ice Cream within the tax regime of 18%.”

The Chhattisgarh High Court, in agreement with the association's argument, stated that ice cream is a widely consumed good that cannot be considered a luxury item. The court also added that the GST Council should have taken into account the socio-economic effects of its decision before excluding ice cream manufacturers from the composition scheme.

The GST Council is now required to reconsider its decision on ice cream manufacturers within three months of receiving a copy of the court's decision.

To Read the full text of the Order CLICK HERE

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