AAR Gujarat: Classification of Ice Cream Supply as ‘Restaurant Service’ vs. ‘Supply of Goods’
The Gujarat Authority for Advance Ruling (AAR), comprising Shri Vishal Malani and Smt. Sushma Vora, issued a ruling on February 19, 2026, clarifying the GST classification for ice cream sold in various service contexts. The ruling distinguishes between “restaurant services” and the “supply of goods” based on the manufacturing location and the nature of the transaction.
1. Nature of the Applicant’s Business
The applicant, Mohammed Sajid Mohammed Sharif Kakuwala, proposed to operate multi-product retail outlets in Ahmedabad. Key features of the business include:
- Diverse Menu: Preparation and sale of Bhajiya, Khaman, Sandwiches, Pizza, Juices, Falooda, Milkshakes, and Ice cream.
- Facilities: Outlets offer both dine-in and takeaway options.
- Manufacturing: Ice cream is either prepared at the retail outlet itself or in a separate manufacturing unit.
2. Classification of “Restaurant Service”
The AAR ruled that the classification depends on how and where the ice cream is handled:
| Scenario | Classification | Reasoning |
| Prepared in the retail outlet and supplied to dine-in or retail customers. | Restaurant Service | It partakes the character of food prepared in a restaurant, even if taken away. |
| Prepared outside but served as part of a composite offering (e.g., in faludas, milkshakes, or with cooked food). | Restaurant Service | The prepared food is the principal supply, making it a composite service. |
| Prepared outside and sold over the counter as a standalone item. | Supply of Goods | No further processing or service is performed at the outlet. |
3. Business-to-Business (B2B) Transactions
The Authority established a strict boundary for B2B supplies:
- All B2B supplies of ice cream are treated as a supply of goods, regardless of whether the ice cream was manufactured at the retail outlet or brought in from a separate unit.
4. Applicable GST Rates
The ruling clarified the tax rates following the rationalization effective from September 2025:
- Restaurant Services: Attract 5% GST without eligibility for Input Tax Credit (ITC).
- Supply of Goods: Standalone ice cream sales (B2B or B2C where no service is involved) attract 5% GST under Sr. No. 141 of Notification No. 9/2025-Central Tax (Rate).
- Separate Manufacturing Unit: If a separate registration is obtained for the manufacturing unit, its B2B and B2C supplies are considered a supply of goods taxable at 5%.
Conclusion of the Authority
The retail outlets themselves qualify as “restaurants” because they prepare food and provide dine-in facilities. However, the specific tax treatment of ice cream depends on its role in the transaction: it is a service when it is a culinary creation of the outlet or part of a mixed dish, and a good when sold as a pre-manufactured standalone product.