GST Rate on Ice Cream for Ice Cream Parlors vs. Restaurant

Rules 1252 views 3 replies

P GUNAPALAN

PROPREITOR

66 Points Joined November 2011

The recent Circular No. 164 /20 /2021-GST from CBIC dated 6th October, 2021 has clarified that all ice cream parlours “would attract GST at the rate of 18%”. The circular also states that “Ice cream parlors sell already manufactured ice- cream and they do not have a character of a restaurant” and that “supply of ice-cream parlor stands on a different footing than restaurant service. Their activity entails supply of ice cream as goods (a manufactured item) and not as a service,”.

I have the following questions:

What is the date of applicability of this clarification, i.e. from which date are ice cream parlours expected to pay GST at 18%? Is a retrospective charge from Nov 2017 possible?
Will ice cream parlours who operate like a restaurant and provide table service fall under this ruling?
In case ice cream parlours are treated as dealing in supply of goods, can they opt for GST composition scheme and pay GST at the rate of 1%, in cases where turnover is below 1.5 Crore per annum?

Replies (3)

CA Akshay Hiregange

Partner - Audit & Assistance

4825 Points Joined December 2018

1. No it would not be applicable retrospectively. Judgement below may help, although department may issue notices retrospectively due to lack of knowledge.

Judgements - A recent judgment of the Tribunal in the case of L&T Sargent & Lundy - 014(35) STR945 (Tri. Ahmd., depending on a Supreme Court judgement in the case of Suchitra Components Ltd. Vs. Commissioner - 2008(11)ST- R430(SC), and Jai Fibres Ltd. vs. CCE, Mumbai -2007 (218) E.L.T. 484 (S.C.), has held that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively.

2. No restaurants will attract 5% rate itself (unless in a place which provides accommodation of > 7500 per day). Ice cream served there will not be covered under this circular in my view

3. Presently not covered in composition scheme and specifically excluded. In May 2021 it was referred back to fitment committee to check if ice creams can be brought under composition scheme at 1%. (not yet confirmed).