The Chhattisgarh High Court directed the GST Council to reconsider the exclusion of Small Scale Manufacturers of Ice Cream from the benefit of composite scheme under Section 10(1) of the Central Goods and Services Tax Act, 2017.

The Court noted that Ice Cream cannot be termed as a luxurious item as all kinds of people use to taste it and the Council ought to have taken into consideration the socio-economic effect as mentioned in the Constitution.

The Petitioner, Small scale Ice Cream manufacturer association approached the Court against the decision of the GST Council which had put the Ice Cream in the negative list hence, deprived them of benefit of composition scheme.

The bench of Justice Rakesh Mohan Pandey observed, “…no reason has been assigned by the Council to exclude the Ice Cream Manufacturers from the benefit of Section 10(1) of the GST Act. The Council ought to have taken into consideration the socio-political effect while putting the Ice Cream within the tax regime of 18%.”

The Petitioner pleaded that with the enforcement of the Goods and Service Tax Act (GST), various Central and State Taxes were unified therefore, businesses or persons who have opted to pay tax under this scheme can pay tax at a flat percentage of turnovers every quarter, instead of paying tax at a normal rate every month. To control the revenue loss, the GST Council introduced a negative list of items on which benefits of the composition scheme under Section 10, shall not be extended.

In the 17th GST Council meeting, it was decided that manufacturers of ice cream, pan masala and tobacco shall not be eligible for composition levy.

The Court noted that the limited grievance of the petitioners is that the ‘Ice Cream’ was placed on par with Pan Masala and Tobacco.

The Court further noted that the Council put Pasta, Macaroni, Cakes, Malt, Mineral Water, Tobacco, Pan Masala etc. under the category of 18% GST and at the same time, kept the rate of tax for Human Hair (dressed, Thinned, and Bleached), Agarbatti at nil.

“The Council kept the rate of tax for certain items at 5% or 12%, though those were the Luxurious items,” Court added.

The Court mentioned the decision of Supreme Court in Aashirwad Films vs. Union of India & Others (2007) 6 SCC 624 where as per the Court, SC held, “…taxation laws must also pass the test of Article 14 of the Constitution and the classification must be reasonable. It is further observed that it is important to read the object of a taxation statute on the touchstone of social values as mentioned in the Constitution and the instrument of taxation is not merely a means to raise revenue in India and it ought to be, a means to reduce inequalities.”

Consequently, the Court directed the GST Council to re-consider the exclusion of Small Scale Manufacturers of Ice Cream from the benefit of Section 10(1) of the GST Act.

The Court disposed of the Petition.

Cause Title: Small Scale Ice Cream Manufacturer Association v. Union Of India (Neutral Citation: 2024:CGHC:11393)

Appearance:

Appellant: Adv. A.V. Shridhar

Respondent: Deputy Solicitor General Ramakant Mishra, Government Adv. Tushar Dhar Diwan

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Chhattisgarh High CourtJustice Rakesh Mohan Pandey

Tanveer Kaur