GST on ice cream
Ice cream manufacturers have to pay GST @ 18% (HSN – 21050000) despite major ingredients (i.e., milk, sugar, fruits, etc) used to manufacture ice cream being exempt from GST. The input tax credit that can be availed by them majorly relates to cost incurred on the packaging, advertising, maintenance expenses, cost incurred in acquiring or renting plant and machinery, and factory premises.
Ice cream manufacturers are not permitted to opt for a composition scheme and pay lower tax @ 1% even if their turnover is less than Rs 1.5 crores.
Note: They are treated at par with the manufacturers of pan masala and tobacco who are not allowed to opt for a composition scheme.
When ice cream is served at the ice cream parlors, it will attract GST @ 18% (HSN – 21050000). As generally, they sell the already manufactured ice-creams and do not engage in any form of cooking at any stage hence will not fall under the criteria of a restaurant. Just by providing seating arrangements, it cannot be treated at par with restaurants.
Note: CBIC has clarified vide GST Circular no. 164 dated 6th October 2021 that even if the supply of ice creams at ice cream parlors has certain ingredients of service will not qualify as a restaurant.
Ice-cream served at restaurants
When ice cream is served at the restaurant, it will attract GST depending upon the GST applicability on the restaurant. As services of supplying goods in the form of food or any other article for human consumption will be classified under restaurant services. So if a restaurant supplies food, beverages, or ice cream it will be treated as restaurant service.
If the restaurant is registered under the composition scheme then GST will not be charged to the customer. (Note: Restaurant will pay 5% GST without ITC)
If the restaurant is required to pay GST @ 5% then 5% GST will be charged to the customer. (Note: Restaurant will pay 5% GST without ITC)
If the restaurant is required to pay GST @ 18% then 18% GST will be charged to the customer. (Note: Restaurant will pay 18% GST with ITC)
Ice-cream served by outdoor caterers
When ice cream is served by outdoor caterers then 18% GST will be charged to the customer. (Note: Outdoor Caterer will pay 18% GST with ITC)