Eligibility to apply for composition Scheme.

[Sangeetha D]

Is a trader in ice cream also ineligible to opt for the composition scheme?

[Sadanand Bulbule]

Yes, subject to threshold limit of turnover.

[YAGAY and SUN]

A trader in ice cream is ineligible to opt for the Composition Scheme under GST in India.

Here's why:

Under Section 10(2)(b) of the CGST Act, a taxpayer cannot opt for the Composition Scheme if they are engaged in the manufacture of goods notified by the Government as ineligible. One such notified item is ice cream and other edible ice, whether or not containing cocoa.

This was notified through:

Notification No. 14/2019 – Central Tax (Rate), dated 7th March 2019

It specifies that manufacturers or traders dealing in:

• Ice cream and other edible ice,
• Pan masala,
• Tobacco and manufactured tobacco substitutes,

are not eligible for the Composition Scheme.

Key Points:

• The restriction applies even to traders (not just manufacturers).
• So, yes, a trader in ice cream cannot opt for the Composition Scheme under GST.

***

[Sadanand Bulbule]

I endorse the factual reply of Yagay & Sun. Apology for incorrect earlier post. 

[Shilpi Jain]

A manufacturer of ice cream is not eligible for composition scheme. No such restriction for a trader. So can opt for composition scheme.

Section 10(2A)

a manufacturer of such goods or supplier of such services as may be notified by the Government on the recommendations of the Council

Notification 14/2019 - CT

Provided further that the registered person shall not be eligible to opt for composition levy under sub-section (1) of section 10 of the said Act if such person is a manufacturer of the goods, the description of which is specified in column (3) of the Table below and falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Table, namely:-

TABLE

Sl. No.	Tariff item, sub-heading, heading or Chapter	Description
(1)	(2)	(3)
1.	2105 00 00	Ice cream and other edible ice, whether or not containing cocoa.

[Sadanand Bulbule]

Dear Yagay & Sun Sir

Plz re-validate my first reply and that of Madam Shilpi Jain as regards to the entitlement of composition benefit for TRADERS in ice-cream in view of the specific disentitlement for manufacturers of ice-cream in terms of Notification No. 14/2019-CTR to clear the decks.

[KASTURI SETHI]

  Dear Sir,

The word, 'trader' does not exist in the list of ineligible items for composition scheme.  Will you please clear the air ?

Thank you very much.

[Sadanand Bulbule]

Dear all

The CBIC Circular No.164/20/2021-GST dated 06/10/2021 and Circular No. 177 /09/2022 -TRU dated 03/08/2022 seem to be issued in the context of S. 10(1)(b) read with Schedule II, Paragraph 6(b) - to clarify that, an ice-cream parlour (trader) is not actually undertaking composite supply and thus, ineligible for 5% composition benefit. Whereas Notification No. 14/2019 has clearly excluded only the manufacturer of ice cream from availing composition benefit, which is the core point here.

What is worthwhile to note is, the definition of composite supply as per S. 2(30) entails supply of 2 or more taxable goods or services which are naturally bundled. Contrary to the above Circulars, nowhere the CGST Act requires someone to manufacture or cook anything to fall under composition scheme. More importantly, excluding an ice-cream parlour by comparing it to a restaurant in itself has no basis in law. In my considered view, so long as ice-creams are sold in scoops or as a customised product by combining multiple flavours and if space is provided for customers to sit and have those ice-creams, it should be eligible for composition benefit.

Any circular issued contrary to the object of the statute is unenforceable and not binding on the authorities, much less on the taxpayers.
To conclude, ice cream parlours being traders are certainly eligible for the benefit of composition scheme as provided under Section 10 [1] of the CGST Act, subject to the compliance of other conditions mentioned in clause (b) & (c) therein.

Experts to open moonlight.

 

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, I concur with your views to the following extent :-

"In my considered view, so long as ice-creams are sold in scoops or as a customised product by combining multiple flavours and if space is provided for customers to sit and have those ice-creams, it should be eligible for composition benefit.

Any circular issued contrary to the object of the statute is unenforceable and not binding on the authorities, much less on the taxpayers.
To conclude, ice cream parlours being traders are certainly eligible for the benefit of composition scheme as provided under Section 10 [1] of the CGST Act, subject to the compliance of other conditions mentioned in clause (b) & (c) therein."

Difference of opinion

(i) The concept of composite supply is not in picture.

(ii) Both circulars and the notification are in letter and spirit of CGST Act. Not contrary to the Act at all.

Sir, Your views are welcome. Pl. widen the horizon of my knowledge, if I am in the wrong in any aspect.

[Sadanand Bulbule]

Dear Sir ji

Relying upon the Notification No. 14/2029–CTR dated 07/03/2019, I wish to add the gist of my multi replies like this:

Retail traders who sell the manufactured ice cream in pre-packed containers across the counters are eligible for composition levy of 1% tax under clause (c) of Section 10(1) subject to limitation of turnover. Secondly, parlours which are engaged in suppling manufactured ice creams in desired quantities with combo flavours in a customised ambience which essentially also involves service, on par with restaurants, without turnover limit, are eligible for 5% composition levy under clause (b) of Section 10(1) of the Act.

It is pertinent to refer Sl. No. 4 of the CBIC Circular No. 164/20/2021-GST dated 06/10/2021 which emphatically speaks about the need of cooking and supply of food” to fall in line with the meaning of “restaurant” as defined in Notification No. 11/2017-CTR for the purpose of composition levy of tax under Section 10 of the Act

However in my understanding, the concept of “composite supply” referred to in clause (b) of paragraph 6 of Schedule II which has been indicated under Section 10(1)(b) does not sink with the clarification vide Circular No. 164/2017 (supra). Essentially there is clear integration between “composition levy” under Section 10(1)(b) and “composite supply” defined vide Para 6 (b) of Schedule II of the Act. This particular definition never insists that there shall be supply of cooked food alone. It simply refers supply of goods in combination of any service is deemed to be supply of service for all purposes of the Act. So in the context of referring the concept of “composite supply” as specifically defined in vide Para 6 of Schedule II read with Section 10[1]b] of the Act, I have opined like that.

To sum up, considering the combined intent of the Act, the benefits of composition levy under Section 10 to the two class of dealers falling under clause (b) & (c) cannot be blocked by way of circulars. Therefore such stakeholders are absolutely free to take independent decision in consultation with the experts that legally suits the facts of their actual business.

Your comments are solicited on this analysis.

Reply

AI Summary

Composition scheme eligibility: manufacturers of ice cream are excluded, traders' entitlement depends on retail versus on premises customised supply.
The notification disqualifies manufacturers of ice cream from the composition levy, but does not name traders; CBIC circulars treat parlours like restaurants and may render certain on premises customised supply ineligible. Eligibility therefore depends on whether the business sells pre packed retail ice cream (generally subject to composition subject to turnover and clause conditions) or provides on premises customised service resembling restaurant composite supply, and on the interpretive effect of the administrative circulars.