Ice cream not a luxurious item, says Chhattisgarh High Court

Chhattisgarh High Court said that ice cream is not a luxurious item and has directed GST Council to reconsider the exclusion of Small-Scale Manufacturers of Ice Cream from the composition scheme.

Ice cream attracts GST at the rate of 18 per cent.

In its order dated April 1, a single judge bench of Rakesh Mohan Pandey said taxation law should pass the test of Article 14 (equality) of the Constitution and there should be reasonable classification. “Ice Cream is being widely consumed by the people of India. It cannot be termed a luxurious item. The Council ought to have taken into consideration the socio-economic effect as mentioned in the Constitution,” the court observed.

Small Scale Ice Cream Manufacturer Association had moved the Court with a plea to quash the notification and recommendation of the GST Council regarding the exclusion of ice cream manufacturers from the Composition Scheme. In order to help small and medium businesses, the GST system prescribes a Composition Scheme. The main feature of the scheme is that the business or person who has opted to pay tax under this scheme can pay tax at a flat percentage of turnovers every quarter, instead of paying tax at a normal rate every month. Initially, the turnover limit for opting this scheme was ₹50 lakh, which was later revised to ₹1.5 crore.

In order to control revenue loss, the GST Council introduced a negative list of items on which benefits of the composition scheme shall not be extended. Accordingly, the Council recommended that manufacturers of ice cream will not be eligible for the composition scheme. Petitioners argued that the GST Council assigned no reason for the inclusion of ice cream manufacturers in the negative list.

The court said, “The Council ought to have taken into consideration the socio-political effect while putting Ice Cream within the tax regime of 18 per cent.”

Accordingly, it directed GST to reconsider the exclusion of Small-Scale Manufacturers of Ice Cream from the benefit of the Composition scheme. “It is expected that the Council shall take a decision preferably within a period of three months from the date of receipt of a copy of this order,” the bench said.

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