Ice cream has generated enough heat among Authority of Advance Rulings (AARs), with the differing rulings by various authorities creating confusion.

The latest one is from the Telangana AAR which ruled that an ice-cream parlour was an eating joint and said that supply of ice-cream along with various services taxable as ‘restaurant-service.’

In a matter related with Venkateswara Agencies, the distributor of ‘SCOOPS’ brand ice cream and ice cream products, AAR held that ice-cream and allied products served in the ice-cream parlour and at customer’s premises during party events will be taxable at 5 per cent without Input Tax Credit (ITC). This ruling is different from two previous decisions.

The Maharashtra AAR in case of Arihant Enterprises held that supply of ice-cream by applicant from its retail outlets in wholesale packs (tubs) or scoops in paper cups/cones not exceeding MRP consumed outside the applicant’s premises constitutes a supply of ‘goods’ thereby taxing it at 18 per cent GST. However, this was ruled to be void-ab-initio for being ‘vitiated by the process of suppression of material facts’ as per AAAR (Appellate Authority for Advance Ruling).

In another matter, Karnataka AAR in the case of Hatsun Agro Product Ltd held that supplying ice-creams made as per the orders of customers and served in outlets qualifies as ‘composite supply’ and will attract 5 per cent GST without ITC.

A composite supply would mean a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. GST rate of principal supply would be applicable for entire supply.

The Telangana AAR observed that the applicant provides in its parlours, certain service activities — serving of ice cream by the waiters, seating facility, air conditioning, drinking facility, provision of dust bin and tissue papers etc. to the customers.

So it classified ‘Supply of ice cream and ice cream allied products, milkshakes served in the parlour with or without adding ingredients like fruits or topping sauces according to the customer taste or requirements’ and ‘Supply of company products to customers as it is basis without any processing for both dining and take away purpose’ under Supply of ‘restaurant service’ at GST rate of 5 per cent.

Moreover, it held that the activity of serving ice creams as per the requirements of the guests at customer’s premises during party events will fall under the definition of ‘outdoor catering service’ attracting 18 per cent GST for the period from November 15, 2017 to September 30, 2019 and attracting 5 per cent GST without availability of ITC from October 1, 2019.

Commenting the AAR Telangana’s decision, Harpreet Singh, Partner at KPMG, said that the frequent amendment in GST rate notifications and contradictory advance rulings on supply of food, ice-cream from kiosks, parlours etc. have caused confusion in the minds of taxpayers.

“There is a thin line of distinction between pure supply of food and services being supplied along with food, but one would need to determine the same to arrive at correct GST rate classification,” he said.