GST update No 246 on recent amendments on ice-cream parlour

Although, it is well known fact that levy of tax on restaurant services has its routes from the erstwhile GST regime wherein the taxpayers ended up paying both service tax and VAT. It was anticipated that this issue will come to an end in GST regime, however, with the passage of time, new set of problems came into light. The wrath of levy of 18% GST retrospectively as decided in 45th GST Council meeting has led to meltdown of various ice-cream parlours. Further, CBIC also issued a clarification in this regard vide Circular No. 164/20/2021-GST dated 06.10.2021 in order to resolve the confusion and discussions. Being one of the most prominent issues under litigations, it was further addressed in 47th GST Council meeting convened recently. The in-depth analysis of the subject matter is focus point of our present update. Lately, in 45th GST Council meeting it was decided to differentiate restaurant services from ice-cream parlours based on different characters since ice-cream parlours do not engage in any form of cooking at any stage, whereas, restaurant service involves the aspect of cooking/preparing during the course of providing service. Hence, recommendations were made to levy GST at the rate of 18% retrospectively on supply of ice-cream in ice-cream parlours. This led to initiation of various disputes since confusion prevailed in the minds of taxpayers as regards to the fact that what will happen in case ice-cream parlours have all arrangements as in restaurants such as seating arrangements, music, dance etc. whether, it still be considered as undertaking supply of goods and therefore, chargeable at the rate of 18%. Furthermore, now-a-days, there is so much innovation that there are certain ice-cream parlours prepare nitrogen-based ice-creams in front of the customers or some of the outlets prepare their own cones in their designated kitchen. In such a scenario, what will be the next course of action of ice -cream parlours i.e. to charge GST at the rate of 5% without input tax credit or 18% with input tax credit? Therefore, in alignment with the above, various clarifications and representations were sought by the small business houses wherein it was submitted that the ongoing Covid-19 pandemic has spread its tentacles across the globe and in such a case, the small taxpayers would be harassed if they were coerced to pay GST at the rate of 18% retrospectively. Consequently, they would be compelled to shut down their business. Henceforth, taking into consideration all the representations and submissions of the business houses, it is now recommended in 47th GST Council meeting that GST shall be charged at the rate of 5% without input tax credit on supply of ice-cream by ice-cream parlours during the period from 01.07.2017 to 05.10.2021. This is done to regularise and avoid unwanted litigations. Meaning thereby, that even if the ice-cream parlours out of confusion paid GST at the rate of 5% without availing any input tax credit, the departmental authorities cannot initiate any action against the same. However, the next issue which arises in such a scenario is what will be the consequences in case any ice-cream parlour has already levied GST at the rate of 18% along with input tax credit. Whether any refund be sanctioned in such a scenario thereby treating both the ice-cream parlours at equal footings? A suitable clarification should be issued by the Government at the earliest possible so as to enable the ice-cream parlours to take suitable course of action. Failing this, the ice-cream parlours will subsequently be engaged in supplying any other goods along with ice-creams in order to safeguards themselves from the heavy levy of GST at the rate of 18%.

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GST update No 246 on recent amendments on ice-cream parlour

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