Classification of Ice Cream Sold from Retail Outlets: AAR rules 5% GST Applicable on Supply of Ice Cream as Goods [Read Order]

The Authority forAdvance Ruling (AAR) Gujarat has issued guidelines on taxation related to ice cream sales. The ruling has stated that ice cream supply through retail outlets and manufacturing units would be classified as a 'supply of goods' and would be liable to 5% tax on GST along with Input Tax Credit benefits, unless it is classified as 'restaurant services.'

READ MORE:Reassessment Invalid after Approval Of CIRP Resolution: ITAT upholds Deletion of ₹6.41 Cr Addition on Undisclosed Income

The applicant, Mohammed Sajid Mohammed Sharif Kakuwala is an entrepreneur from Ahmedabad who has a business that involves ice cream manufacturing and sale. The applicant sells ice cream through various means including direct consumption through retail outlets and Business to Business (B2B) supplies.

The applicant had filed an application to the Gujarat AAR to clarify whether his business activities should be classified as a service or a sale of goods, especially after receiving notifications from the government regarding GST.

The applicant claimed that their outlets operate mainly as ice-cream parlors and not restaurants. Therefore, they claimed that if the main activity is the supply of a commodity irrespective of whether it is manufactured in-house or obtained from outside it would qualify for a supply of goods.

This was a crucial claim for the applicant to qualify for Input Tax Credit which is denied under the 5% 'Restaurant Service' category.The Authority examined the nature of the transaction and the facilities provided at the outlets.

According to them the classification would depend on the service component. If the supply has characteristics such as table service and seating for dining it would qualify for a 'Restaurant Service' at 5% with no ITC.

However, the Bench comprising Sushma Vora (Member SGST) and Vishal Malani ( Member CGST) clarified that in the case of B2B and retail sales of ice cream as a product even though the same is being manufactured at the outlet and the activity amounts to a "Supply of Goods." The AAR held that the supplies are liable to 5% GST with the benefit of ITC.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates