The Centre has issued a circular clarifying that the supply of ice cream by parlours will attract 18% goods and services tax (GST) with an input tax credit. The GST Council had approved the proposal at its Lucknow meeting on September 17 this year.
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 input tax credit. 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 GST rate of 18% with input tax credit.
While the Circular provides necessary clarity on GST treatment for ice cream parlours, it might open areas of doubt for other such food suppliers who sell already manufactured food items with only a certain ingredient of service. In another circular, the Central Board of Indirect Taxes and Customs clarified that UPS inverter will be taxed at 18% and external battery at 28% GST when separate prices are known for the two products on the invoice. The industry, however, is waiting for some clarification about tax rate to be charged in a situation where separate prices are not known and a single price is charged for both items.