Introduction:
Today food industry has gone through several changes taking from traditional restaurants where food was first prepared and then served to online ordering, and cloud kitchens. quick servicing by selling food over the counter In this way the business model of restaurants has been changed. The government has also imposed taxes in the form of GST on this industry. Mainly 2 rates are applicable one is 5% which is a levy on restaurants, cafeterias, and canteens including a contractual basis and 18% is a levy on outdoor catering or those restaurants located within the premises of clubs. As the industry is growing and installing new technology government wants to increase the scope of tax on it and therefore government always tries to review its policies. Well, one of the famous items in our food industry is Ice Cream. Let’s examine the taxability of Ice Cream under the preview of GST.
Circular No. 164 /20 /2021-GST Dated the 6th October, 2021
in the 45th GST council meeting which was held on 17-sep-2021 a circular was passed regarding clarification on certain restaurant service issues and one of the issues was the Taxability of Ice Cream sold by Ice Cream Parlours and Outlets.
- In the circular it was clarified that the parlors are selling manufactured ice cream as there is not any element of cooking just like a restaurant service. hence it will not classify as a restaurant service but it will be considered as a supply of goods and will be taxed at 18% although it has some ingredients of service.
- Services by cloud kitchens/ central kitchens by way of cooking and supply of food, even if it is exclusively by way of takeaway or door delivery or through or from any restaurant, are covered under ‘Restaurant Service’ and attract 5% GST without the input tax credit.
- Restaurant service means the supply of food and beverages by a restaurant, eating joint, or a mess, including the provision of takeaway food or home delivery of food
Advance Ruling by Maharashtra Advance Ruling Authority (Arihant Enterprise):
In this ruling Board also confirms that the Sale of ice cream by ice cream outlets is also a supply of goods as it falls within the definition of section 7 of CGST ACT 2017.
Advance Ruling by Gujrat Advance Ruling Authority (HRPL Restaurants (P.) Ltd):
The Authority states that
- Ice Cream sold by ice cream parlors will come under the definition of Goods and hence shall be taxable at @18%.
- Ice cream sold by restaurants along with food/cooked meals, will consider as a composite supply as per sec 8 of CGST ACT 2017 hence tax rate of restaurants @5% (without ITC)shall be levied. supply of food will be your principal supply.
- Ice cream sold by restaurants stand-alone will be considered a different supply and taxed at @18%.
Hence it can conclude based on the ruling that ice cream sold along with meals is then taxed at @5% otherwise at @18%. Since the difference is based on the type of service which is offered to customers.
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