GST Rate Issue for ice cream parlours may be clarified by the GST Council

The GST Council is anticipated to discuss problems pertaining to the imposition of GST on ice cream parlours at its next meeting later this month.

Previously, ice cream parlour owners had written a petition to the Finance Ministry, requesting clarification on the applicability of GST and the date of its installation at 18 percent.
According to Business Line, a top finance ministry official stated that “The GST council is expected to be consulted on the matter. We will give clarification based on its recommendation “..

On September 17, the GST council, led by Finance Minister Nirmala Sitharaman, met in Lucknow and made many decisions. One was the distinction between restaurants and ice cream parlours; this ruling clarified that ice cream parlours already make ice cream and that the supply of ice cream by parlours would be subject to GST at an 18% rate.

Since there was no distinction between ice cream parlours and restaurants as of July 2017, the parlours or outlets in similar enterprises began charging only 5% tax on their retail sales.

In late October, ice cream shop owners in numerous states began receiving summonses with a one-day notice from GST authorities. The ice cream industry’s alarm bells started ringing when they were asked to provide details on sales made with 5% from July 2017 onwards, and the GST council notified them that the decision of 18% GST on ice cream will have retrospective effect from July 2017.

After receiving tax summons from GST authorities, ice cream shop owners petitioned the Finance Ministry for clarification in November. Ice cream parlour owners and the ice cream association are concerned that the new GST slab’s retrospective effect will make it difficult for them to stay in business, as the entire burden of retrospective tax will fall on the parlour owners, who are already struggling to stay afloat in the midst of the pandemic.