Feb 16, 2021
The Delhi High Court has ordered GST Council to reconsider the exclusion of ice cream from the list of manufacturers eligible for the composition scheme within three months period.
A Division Bench comprising of Justices Rajiv Sahai Endlaw and Sanjeev Narula while settling a petition filed by more than 50 small scale ice cream manufacturing units operating in the Delhi NCR said that the Council should take up the aforesaid aspect in its next meeting and decide at the earliest, keeping in the view that the ice cream season has just begun.
The High Court addressed that the decision should be taken preferably within three months of February 9 as the date of the ruling.
Under the composition scheme, the entrees are required to pay tax at the rate (of turnover) of 1 percent (manufacturers and traders of goods), 5 percent (restaurants not serving alcohol) and 6 percent (other service providers). Businesses having an annual turnover of up to ₹1.5 crores can opt for composition scheme. Manufacturers of goods, Dealers, and Restaurants (not serving alcohol) and small service providers can opt for a composition scheme.
Violation
The petitioners had approached the High Court stating that exclusion of ice cream from the benefits of Composition Scheme is in violation of the spirit of Articles 14 and 19 of the Constitution of India and against the principles of natural justice. “There is no reason for clubbing ice cream with sin goods like pan masala and tobacco,” they rightfully argued.
The High Court wanted to information whether GST Council has conducted any study or valuable data on finding tax effect of benefit being extended under composition scheme.
According to the government officials, no such study has been conducted so far. The Counsel for the government contended that besides the tax effect, several other factors including socio-political and are taken into consideration while taking such decisions further.
Considering the current circumstances, the Bench said, it was of the view that the only direction which can be issued in this petition was to direct the GST Council to reconsider the exclusion of small scale manufactures of ice cream from the benefit of Section 10(1) of the Act, including on the aforesaid two parameters – the components used in the ice cream and the GST payable thereon and other similar goods having similar tax effects continuing to enjoy the benefit.
According to Divakar Vijayasarathy, Founder of DVS Advisors, the government has stated that ice cream has been excluded from the benefit of composition scheme since the major raw material in preparation – milk – is exempt from GST and hence the government could not afford to provide the benefit of composition scheme to ice creams.
“With this stand, the respondent has clarified that exclusion of ice cream from the benefit of composition scheme is not because it is treated as sin good but the major raw material is already exempt from GST,” he said.