GST Rates on supply of ice-cream-by-ice-cream parlours during the period from 01-07-2017 to 05-10-2021

In the 45^th GST Council Meeting, the Council recommended that “Ice-cream parlours supplying manufactured ice-creams will be taxed at 18% GST”. A circular was also issued pursuant to the above meeting clarifying that where ice-cream parlours sell already manufactured ice cream and do not cook/prepare ice cream for consumption like a restaurant, it is the supply of ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, the circular clarified that ice cream sold by a parlour or any similar outlet would attract GST at the rate of 18%. Refer to Circular 164/20/2021-GST dated 06.10.2021. Accordingly, ice-cream parlours selling already manufactured ice cream do not have a character of a restaurant & thus attract 18% GST with ITC.

Further, the CBIC came out with yet another circular “Circular No. 177/09/2022-TRU dated 3^rd August 2022” to give more clarity on the GST rate issue in the case of ice-cream parlours.

Following are the important clarifications on this issue:

• With effect from 06^th October 2021, the ice-cream parlours are required to pay GST on the supply of ice cream at the rate of 18% with ITC in accordance with recommendations of the GST Council.
• It was represented that ice-cream parlours which paid GST @ 5% without ITC in view of prevailing doubt before the issuance of the circular dated 06.10.2021 did not avail ITC and paid 5% GST in cash. Such ice-cream parlours have thus foregone significant ITC benefits. In this regard, it has now been clarified that past cases of payment of GST on supply of ice-cream-by-ice-cream parlours @ 5% without ITC during the period 01^st July 2017 to 05^th October 2021 shall be treated as fully GST paid to avoid unnecessary litigations.
• Since the decision is only to regularize the past practice, no refund of GST shall be allowed, if already paid at 18%.

Disclaimer: The above article is based upon the circulars issued by CBIC and is meant for informative purposes only. Taxwink shall not be responsible for any loss or damage caused to any person due to this information.