Ice creams sold by a parlour or such outlets will attract 18 percent Goods and Services Tax (GST), the CBIC said on Wednesday. In two sets of circulars, the Central Board of Indirect Taxes and Customs (CBIC) clarified on issues raised by trade and industry on rates changes related to 21 goods and services, the decision of which was taken at the 45th GST Council meeting on September 17.
With regard to ice cream parlours, the CBIC said such places sell already manufactured ice cream and do not have the 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," it said. It clarified that their activity entails the supply of ice cream as goods (a manufactured item) and not as a service, even if certain ingredients of service are present, adding this would attract GST at the rate of 18 percent.
EY Tax Partner Abhishek Jain said earlier the advance ruling authorities in some cases had concluded that ice cream sold in ice cream parlours would be covered under restaurant services (except when sold in bulk orders) and therefore attract
GST rate of 5 percent (without input tax credit or ITC)). The circular now provides that since ice cream parlours sell already manufactured ice cream, they do not have character of a restaurant and accordingly, would attract GST rate of 18 percent (with ITC).
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"While the Circular provides necessary clarity on GST treatment for ice cream parlours, it might open area of doubts for other such food suppliers who sell already manufactured food item with only a certain ingredient of service," Jain added. AMRG & Associates Senior Partner Rajat Mohan said "this change comes as a clarification meaning thereby that it will be applicable retrospectively resulting into massive tax demands for thousands of ice cream parlours across the country. Retrospective application of this clarification would be challenged by numerous ice cream chains in the court of law."
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CBIC circular also clarified that services by cloud kitchens or central kitchens will be covered under restaurant services. 'Restaurant service' includes services provided by restaurants, cafes and similar eating facilities, including takeaway services, room services and door delivery of food. Accordingly, service by an entity, by way of cooking and supply of food, even if it is exclusively by way of takeaway or door delivery or through or from any restaurant, would be covered by restaurant service, it said.
The CBIC said services by cloud kitchens or central kitchens will attract 5 percent GST, without ITC benefit. With regard to fresh and dried fruits and nuts, the CBIC said fresh fruit and nuts would cover those which are meant to be supplied in the state as plucked. They continue to be fresh even if chilled. However, fruit and nuts do not qualify as fresh once frozen (cooked or otherwise), or intentionally dried to dehydrate including through sun drying, evaporation or freezing, for supply as dried fruits or nuts.
At present, fresh nuts (almond, walnut, hazelnut, pistachio etc) are exempt from GST, while dried nuts under these headings attract 5 and 12 percent GST. Therefore, "exemption from GST to fresh fruits and nuts covers only such products which are not frozen or dried in any manner as stated above or otherwise processed," the CBIC said, adding that supply of dried fruits and nuts will attract 5 and 12 percent GST.
