As part of a full clarification of the tax duty on a variety of products and services, the Central Board of Indirect Taxes and Customs (CBIC) has confirmed that ice cream supplied by a parlour or equivalent outlets will attract 18% Goods and Services Tax (GST) with an input tax credit.
To prevent unnecessary litigation, the federal tax agency stated in a circular that previous tax dues of ice cream parlours that incurred GST at the rate of 5% without input tax credit will be recognized as completely GST paid. It has also been stated that the new rate will take effect on October 6, 2021.
The Centre provided relief to ice cream parlours by stating that the 18% GST will not be implemented retroactively.
“Because the judgment is simply to regulate the previous practice, no refund of GST will be authorized if already paid at 18%,” the CBIC stated.
It is worth noting that the all-powerful GST Council last September recommended levying GST on ice cream parlours at the rate of 18% with an input tax credit, rather than 5% without, arguing that because they sell already manufactured goods, they are not restaurants and thus attract GST at the higher rate.
Furthermore, the finance ministry stated in the same circular that any sum or price charged to prospective students for entry or admission, or for the issuing of eligibility certificates, as well as services linked with transit cargo both to and from Nepal and Bhutan, are free from GST.
The circular further said that cancellation fees collected by hotels and tour operators will be charged at the same GST rate as the core service.
It was clarified that an electric car, with or without batteries, will be subject to a 5% GST rate, whereas mangoes other than fresh, sliced, and dried mangoes will be subject to a 12% GST rate.
“The proactive initiative taken by the CBIC by the issue of present clarifications is anticipated to be advantageous to enterprises across many sectors,” said Saurabh Agarwal, Tax Partner at EY.