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%.