Manufacturers of ice cream products, which typically include ingredients like sugar, milk, and dry fruits, are subject to Goods and Services Tax (GST). These manufacturers are eligible to claim Input Tax Credit (ITC) on milk, which has been under GST since July 2022, as well as on various operational costs such as maintenance, advertising, packaging, and plant machinery. Recent amendments from the 56th GST Council meeting, effective September 22nd, 2025, have reduced the GST rate on ice cream and other edible ice products (with or without cocoa) from 18% to 5%. This document examines the GST structure pertinent to ice cream production, covering ITC advantages and relevant regulations.

Scope of Taxation

Ice cream manufacturers are ineligible for the composition scheme, meaning they cannot opt for the reduced tax rate of 1%, even if their annual turnover is less than INR 1.5 crores. The 45th GST Council meeting determined that ice cream parlours involved in selling manufactured ice creams would incur an 18% tax rate, with the benefit of Input Tax Credit (ITC). The Ministry of Finance clarified that this 18% GST would not be applied retroactively. Any outstanding GST liabilities for ice cream parlours previously taxed at 5% without ITC would be considered fully settled to prevent legal disputes.

According to Circular No. 164, dated October 6th, 2021, even if ice creams served at parlours include service elements, these establishments are not classified as restaurants. Consequently, ice creams sold by parlours or similar vendors are subject to an 18% GST. When ice cream is supplied within a restaurant setting, its GST treatment aligns with the restaurant's classification as a service provider for food, beverages, and other goods.

Availability of ITC on Making and Sale of Ice Cream

The availability of Input Tax Credit (ITC) for restaurants and caterers supplying ice cream varies based on their GST registration status:

• If a restaurant operates under the composition scheme, it will not levy GST on the customer, instead paying GST at a 5% rate without claiming ITC.- For restaurants liable to pay 5% GST, this rate is passed to the consumer, and the restaurant remits 5% GST without ITC.- Restaurants subject to 18% GST will charge 18% to the end consumer and can claim ITC.- Outdoor caterers serving ice cream will charge 18% GST to the customer, pay 18% GST, and are eligible for ITC.

Authority for Advance Rulings (AAR) on GST on Ice Cream

The Authority for Advance Rulings (AAR) in Maharashtra ruled that a GST rate of 18% applies to the supply of ice cream scoops. This decision stemmed from a case involving Arihant Enterprises, which operated a franchisee model selling ice creams primarily in retail packaging and also as scoops. The applicant contended that providing ice cream scoops involved negligible service, noting that few outlets offered limited seating, mainly for specific demographics. Customers could also consume scoops outside the premises.

However, the AAR determined that serving ice cream scoops did not constitute a service; rather, it was fundamentally a supply of goods. Therefore, the transaction is subject to 18% GST, and the company is entitled to Input Tax Credit (ITC). The AAR also noted that the company sold ice creams in their original form, at prices not exceeding the Maximum Retail Price (MRP), and that consumption often occurred off-site. These factors reinforced the classification of the transaction as solely a supply of goods.