The government said a GST of 18% should be levied on ice cream even when they are sold inside a parlour. Earlier, ice creams attracted 5% tax when sold inside parlours and 18% outside.

The government said on Wednesday that ice cream is the same whether it is sold inside an ice-cream parlour or outside, and should attract the same rate of goods and services tax (GST).

The government said a GST of 18% should be levied on ice cream even when they are sold inside a parlour. Earlier, ice creams attracted 5% tax when sold inside parlours and 18% outside.

"It is clarified that where ice cream parlours sell already manufactured ice cream and do not cook/prepare ice cream for consumption like a restaurant, it is supplied ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, it is clarified that ice cream sold by a parlour or any similar outlet would attract GST at the rate of 18%," a Ministry of Finance directive to tax officials read.

Abhishek Jain, tax partner at EY India, said: "Earlier the advance ruling authorities in some cases have concluded that the ice cream sold in ice cream parlour would be covered under restaurant services (except when sold in bulk orders) and therefore attract the GST rate of 5% (without input tax credit) ... the circular now provides that since ice cream parlours sell already manufactured ice cream, they do not have the character of a restaurant and accordingly, ice cream would attract a GST rate of 18% (with ITC). While the circular provides necessary clarity on GST treatment for ice cream parlours, it might open an area of doubt for other such food suppliers who sell already manufactured food items with only a certain ingredient of service."