There was a long time confusion whether to pay GST at the rate of 5% or 18% on sale of ice cream in specified ice cream parlors. Accordingly, CBIC has issued the clarification circular on GST on Ice cream sale in parlors. In this article, we will understand the latest updates regarding GST Taxation on Ice Cream.
What is GST?
Goods and Services Tax is a consolidated indirect tax policy that encompasses VAT, CST, Service Tax, Central Excise duty, Entertainment Tax, etc, and is valid all over India with effect from 1st July 2017.
The registration of any business organization under the GST Law entails acquiring a unique GST number from the relevant tax authority.
Furthermore, for the purposes of collecting taxes on behalf of the government and claiming Input Tax Credit for taxes on inbound supplies, it is mandatory to have GST Registration.
In simple words, GST is required to be paid by sellers of goods and services to the government.
GST on ice cream sale in parlors explained
The Central Board of Indirect Taxes and Customs (CBIC) answered problems raised by business and commerce regarding rate modifications for 21 goods and services in the circulars.
The decision was made during the 45th GST Council meeting on September 17.
Have a look at key highlights of GST Council Meeting at – 45th GST Council Meeting – Latest GST Updates
GST on Ice-cream in Restaurants vs in Parlors
As per the circular, Ice cream parlors serve pre-made ice cream and do not have the atmosphere of a restaurant. Restaurant service includes the component of cooking/preparing while delivering service, whereas ice cream parlors do not participate in any sort of cooking at any point. As a result, the ice cream shop supply is treated differently from restaurant service.
Even though certain service elements are present, their action includes the delivery of ice cream as a product (a produced commodity) rather than a service. Thus, Ice Cream sold in parlors will not attract GST Rates of restaurants.
Find the circular regarding GST on Ice Cream at – Circular-No-164-2021-GST.pdf
Ice Cream sale in Parlors will attract higher GST
The GST department has now clarified, as proposed by the Council, that when ice cream parlors sell ready-made ice cream and do not cook/prepare ice cream for consumption like a restaurant, it is a supply of ice cream as products rather than a service, even if the supply contains some service components.
As a result, it is clarified that ice cream served by a parlor or other similar establishment would be subject to GST at the rate of 18%.
Moreover, If you want any other guidance relating to GST Registration, please feel free to talk to our business advisors at 8881-069-069.
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