AAR Clarifies GST Classification for Mixed Ice Cream Sales and Restaurant Services

AAR Clarifies GST Classification for Mixed Ice Cream Sales and Restaurant Services

The applicant, Mohammed Sajid Mohammed Sharif Kakuwala, proposed starting a multi-product food business in Ahmedabad. Their product line included freshly prepared items like Bhajiya, Pizza, and Ice cream, served through a network of retail outlets featuring dine-in and takeaway options.

The ice cream would either be manufactured at the retail outlet itself or brought in from a separate manufacturing unit. It would then be sold directly to customers or used as an ingredient in other preparations like milkshakes and faloodas. The applicant sought a ruling on whether these activities qualify as “restaurant services” and what the applicable GST rates would be, especially for business-to-business (B2B) transactions.

Issues Raised: Whether the sale of ice cream manufactured at the same premises or a separate unit and sold through retail outlets qualifies as ‘restaurant services’ taxable at 5% without ITC. The tax treatment of ice cream supplied in B2B transactions or through a separately registered manufacturing unit.

Advance Authority’s Decision: The Authority for Advance Ruling (AAR) provided a bifurcated decision based on the nature of the supply. It ruled that ice cream prepared within the retail outlet and supplied to customers (dine-in or takeaway) qualifies as “restaurant services”. Similarly, if pre-manufactured ice cream is served with cooked food or used in prepared items like faloodas, it is treated as a composite supply qualifying as restaurant service. However, pre-manufactured ice cream sold over-the-counter without further processing is considered a supply of goods.

Also, any ice cream supplied for B2B transactions, regardless of where it was manufactured, is classified as a supply of goods as it lacks the service element. Under Notification No. 9/2025-CT(R), the supply of ice cream as goods attracts a GST rate of 5%.