The finance ministry has said that ice cream, whether sold inside a parlour or outside, should attract the same rate of GST (goods and services tax).
In a directive issued to tax officials, the ministry stated that a GST of 18% should be levied on ice cream, which is a good (manufactured item) and not a service. Earlier, a 5% tax was imposed on ice creams, when sold inside parlours and 18% when retailed outside.
"Ice cream parlours sell already manufactured ice- cream and they do not have a character of a restaurant. Ice-cream parlours do not engage in any form of cooking at any stage, whereas restaurant service involves the aspect of cooking/preparing during the course of providing service," the ministry said in a set of clarifications issued on Wednesday.
"Thus, supply of ice-cream parlour stands on a different footing than restaurant service. Their activity entails supply of ice cream as goods (a manufactured item) and not as a service, even if certain ingredients of service are present," it added.
The clarifications are based contingent on decisions taken in the GST Council meeting held on September 17 comprising services of cloud kitchens, grant of mining rights, satellite launch services, and services pertaining to contract manufacture of liquor.
"Accordingly, as recommended by the Council, 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 supply of 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 further stated in its circular.
It also noted in the communique that according to GST Council recommendation, the service delivered by way of cooking and supply of food, by cloud kitchens or central kitchens come under 'restaurant service' and thus attracts 5% GST without input tax credit (ITC).
It is clear that takeaway services and door delivery services for the consumption of food are also considered as restaurant service, the ministry noted.
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