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Ice cream parlours are feeling the heat as GST Authorities in various States have started issuing summons since an October 6 clarification on a new system of levy.
In its September 17 meeting, the GST Council clarified that ice cream parlours sell already manufactured ice cream. As such, the sale of ice cream by parlours would attract GST at the rate of 18 per cent.
Ice cream sold by parlours to attract GST at 18%
Following this, on October 6, the Finance Ministry issued a clarification saying that ice cream and do-not-cook/prepared ice cream for consumption, like in a restaurant, is supply of ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, it was clarified that ice cream sold by a parlour or any similar outlet would attract GST at the rate of 18 per cent.
Industry said that GST at the rate of 5 per cent on retail sale was being collected till October 5. After October 6, the clarification was to collect GST at 18 per cent but at the retrospective effect of applicability since July 1, 2017. This impression has gained ground because tax officials have worded the summons subsequently issued as: “Summons for paying 13 per cent difference since November 2017.”
It may be noted that the GST Council had, on November 10, recommended that all standalone restaurants irrespective of being air-conditioned or otherwise, would attract GST at 5 per cent without input tax credit. Ice cream parlours or such outlets were being treated like restaurants.
Copies of summons perused by BusinessLine reveal that the concerned officials are “making inquiry in connection with GST Case under section 70 of CGST Act 2017, section 14 of the Central Excise Act 1944, read with section 83 of the Finance Act, 1994 and further read with section 174 (2) of the CGST Act, 2017.” While the first three sections deal with power to summon persons to give evidence and produce document, the last one is about what would happen in case of repeal of a law.
How about ice-creams without milk?
Summons seek submission of 13 categories of documents related with the period starting with FY 2017-18. These include copies of the Income Tax Returns along with Form 26AS, Profit & Loss Accounts, copies of all bank accounts, copies of agreement with ice cream stores, details of billing software, month-wise sales report, month-wise GST liabilities, tax paid in cash and ITC, note on business arrangement with online platforms besides others.
Representation to FinMin
For the moment, ice cream manufacturers are awaiting further clarification from the Finance Ministry. They have submitted representations to the Ministry requesting that, “the board may kindly take steps either to clarify that the GST rate of 18 per cent on supply of ice cream by ice cream parlours would have only prospective effect, and if necessary, to suitably amend Notification No.11/2017-Central Tax (Rage) to apply the rate of 5 per cent GST for the period from July 01, 2017, till the date of the present clarification i.e., October 6, 2021.”
They submitted that the Covid-19 pandemic has already pushed innumerable such persons out of business. “In such a situation, if the ice-cream parlours are coerced into paying GST @ 18 per cent for the past supplies with effect from July 1, 2017, most of them would go bankrupt and would be compelled to close down their businesses as most of such suppliers are small businesses,” the representation said.
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