Ice cream sold over counter but not prepared in outlet to attract 18% GST

If ordered with food, tax would be the lower rate; over the counter, it would attract a higher GST

Sale of ice cream would draw 5 per cent or 18 per cent goods and services tax (GST), depending on how it is sold.

The one sold over the counter and not prepared in the outlet concerned would be treated as ice cream from parlour. It would hence attract 18 per cent GST, ruled the Gujarat-based Authority for Advance Rulings (AAR). The sale of such ice creams would be treated as the supply of goods, it said.

On the other hand, an ice cream when ordered and supplied along with cooked or prepared food through the outlets would assume the character of composite supply. It would draw 5 per cent GST without input tax credit.

Such a sale would be treated as composite supply with food as the principal one and come under restaurant services, ruled the AAR.

The AAR interpreted the GST Council decision and relevant circulars in this regard.

Sandeep Sehgal, partner, tax, AKM Global, said, “The AAR has clarified that the applicability of GST on the sale of readily-available ice cream by restaurants and eating joints shall be 18 per cent. However, when served with food in a restaurant, it has been considered naturally bundled. Hence, a composite supply would be taxable at 5 per cent. However, when taxed at 5 per cent, the restaurant owners are not eligible to claim the credit of GST paid on purchase of ice creams.”

The authority announced the order on an application filed by Ahmedabad-based HRPL Restaurant, which runs a chain of eating joints.

The AAR found that ice cream sold by outlets of the applicant is already manufactured. The applicant had sold its ice cream division way back in 2017.

“Therefore, we hold that ice cream sold by the applicant’s outlet over the counter would not fall within the ambit of ‘restaurant service’ and is the supply of goods. Hence, it would attract GST at the rate of l8 per cent,” the AAR ruled.

However, an ice cream when ordered and supplied along with cooked or prepared food will draw five per cent GST without input tax credit, ruled the AAR.