GST of 18% applicable on ice creams not 5% from here on: government tells taxmen

The government said that a GST of 18% should be levied on ice creams even when they are sold inside a restaurant. Earlier ice creams attracted 5% tax when sold inside restaurants and 18% when sold outside the restaurants.

“It is clarified that where ice cream parlours sell already manufactured ice- cream and do not cook/prepare ice-cream for consumption like a restaurant, it is supplied ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, it is clarified that ice cream sold by a parlour or any similar outlet would attract GST at the rate of 18%,” the Ministry of Finance directive to tax officials read.

Abhishek Jain, tax Partner at EY India said, “Earlier the advance ruling authorities in some cases have concluded that the ice cream sold in ice cream parlour would be covered under restaurant services (except when sold in bulk orders) and therefore attract GST rate of 5% (without ITC). Whereas, the Circular now provides that since ice cream parlours sell already manufactured ice cream, they do not have the character of a restaurant and accordingly, ice cream would attract a GST rate of 18% (with ITC). While the Circular provides necessary clarity on GST treatment for ice cream parlours, it might open an area of doubt for other such food suppliers who sell already manufactured food items with only a certain ingredient of service.”

The controversies around product categorisation have been at its peak following several advance rulings. There have been controversies around the GST rate on papads, lassi and samosas.

Earlier too advance rulings have ruled on GST applicable on food items. So parata is not similar to paratha but naan and a samosa eaten over the counter and on a chair outside the shop probably tastes different as it should be taxed differently.

Many other rulings include whether a cookie wrapped in chocolate is a cookie or a chocolate wrapped around a wafer biscuit is a biscuit.