The Goods and Services Tax (GST) system establishes ice cream as a taxable product that manufacturers, ice cream parlours, restaurants, and small food businesses must understand. The GST law classifies ice cream as a taxable product which generates specific tax obligations and input tax credit (ITC) requirements for businesses.

The various business activities which include manufacturing, wholesale, retail, and restaurant supply require organizations to understand how GST operates to maintain their tax obligations while achieving accurate product pricing.

GST Rate on Ice Cream

The HSN Code 2105 classifies ice cream products which the law mandates to pay 18% GST.

The 18% tax rate applies to:

All packaged ice cream sales
Ice cream cups
Cones
Family packs
Ice cream scoop sales at parlours
Ice cream products which contain cocoa or chocolate

All ice cream products maintain an 18% GST rate which does not change based on their flavor or packaging design.

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Are Ice Cream Parlours Treated as Restaurants?

No.

GST authorities established that ice cream parlours which offer seating do not meet restaurant classification standards. The parlour provides ice cream to customers as a product which customers take home rather than a service.

Tax rate: 18%
Input tax credit: Allowed

The nationwide taxation system maintains consistent tax rates throughout the entire nation.

GST on Ice Cream Served in Restaurants

The tax treatment of ice cream depends on the restaurant's GST classification when it appears on the menu as a restaurant meal component.

If Restaurant Pays 5% GST:

No input tax credit allowed
Ice cream included in restaurant bill is taxed at 5%

If Restaurant Pays 18% GST:

ITC is allowed
The restaurant provides ice cream which forms part of its complete service

The classification depends on whether the transaction is treated as a supply of goods (parlour) or service (restaurant).

Can Ice Cream Sellers Opt for Composition Scheme?

No.

The GST Composition Scheme remains unavailable to ice cream manufacturers and sellers who reach ₹1.5 crore in total revenue.

The following reasons explain why ice cream producers face restrictions when applying for composition benefits:

Ice cream producers must use standard GST registration procedures
All businesses need to apply 18% GST
Businesses must submit standard GST documentation

Input Tax Credit (ITC) on Ice Cream

The following items create ITC eligibility for businesses which manufacture or sell ice cream products:

Milk
Sugar
Flavouring agents
Packaging materials
Machinery and equipment
Rent of commercial space
Advertising and marketing expenses
Maintenance and utility costs

The ITC system lets businesses decrease their total tax obligations while improving their profit margins.

Businesses who operate under the restaurant scheme which applies a 5% tax rate lose their input tax credit eligibility.

Why Is Ice Cream Taxed at 18%?

GST classification system determines that ice cream receives treatment as a value-added product while basic dairy products receive different treatment.

Processed dairy products which contain:

Added sugar
Flavour
Packaging
Branding
Processing
Commercial sale

Receives higher tax rates than plain milk which maintains its exempt status.

The 18% tax bracket applies to ice cream.

Example: GST Calculation on Ice Cream

The ice cream parlour sells a family package which costs ₹500.

GST @18% = ₹90

Final price = ₹590

The seller collects ₹90 as GST which he will use to deduct input credits from the total tax obligation.

Impact of GST on Ice Cream Businesses

The tax rate remains the same throughout every area of India
The system creates clear billing procedures which provide better visibility
Manufacturers and retailers who meet the rules receive ITC advantages
Business operations require them to follow regular GST rules

Businesses need to handle their HSN classification accurately while creating proper GST invoices to avoid disputes.

Frequently Asked Questions (FAQs)

What is the GST rate on ice cream in India?

Ice cream is taxed at 18% under HSN Code 2105.

Is GST on ice cream different in parlours and restaurants?

Yes. Parlours charge 18% GST (goods). Restaurants charge either 5% or 18% depending on their established tax structure.

Can ice cream sellers use the composition scheme?

No. Ice cream sellers and manufacturers are not allowed to opt for the composition scheme.

Is input tax credit available on ice cream?

Yes, ITC is available under the regular 18% GST structure. It is not available if taxed under the 5% restaurant scheme.

Is GST applicable on homemade ice cream?

The rule describes that 18% GST will be applied to products which reach the commercial market and surpass the GST registration requirements.

Is ice cream considered a dairy product under GST?

Ice cream qualifies as a dairy product according to GST regulations. Ice cream made from milk is classified as a processed food product which requires 18% tax payment.

What is the GST registration limit for ice cream businesses?

Businesses with annual turnover exceeding ₹40 lakh (₹20 lakh for special category states) must register under GST.

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