Ice cream companies pin hopes on post-election GST rate cut

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Ice cream companies have doubled down on their efforts to reduce GST rate by approaching the President, who has duly forwarded their representation to the Finance Ministry. Subsequently, they have key Finance Ministry officials with a plea for lowering the tax.

Ice cream, sold through shops or parlours attracts 18 per cent GST. However, if it is bundled with food supplies by hotels or restaurants, it is treated as part of ‘restaurant service’ and attracts 5 per cent GST. The GST Council can decide on any rate cut, which is expected to meet soon after the formation of the new government at the Centre and also in some States.

“We request that the GST Council may kindly consider reducing the rate of GST of ice cream/frozen dessert to 5 per cent across the board and by this initiative the price of the product would come down thereby raising the demand/consumption of ice creams amongst the people of India,” Indian Ice-Cream Manufacturers’ Association said in a representation to the Finance Ministry.

 Further, it argued that an average Indian consumes just 400 millilitres of ice cream as against 28.4 litres in New Zealand, 20.8 litres in USA and 18 litres in Australia.

According to companies, ice-cream is a dairy product. Among various diary products, GST on milk is NIL, while it is 5 per cent on paneer, curd, lassi, yoghurt and buttermilk. Most of the raw materials of ice-cream are animal/agriculture based and are taxable at the NIL rate of GST or 5/12 per cent as against 18 per cent on ice cream. All these make ice cream costly.

The association also argued that up to 40 per cent of manufacturers are in the unorganised sector. “If GST of ice cream is brought down to 5 per cent, most of the small and tiny unorganised enterprises will come under the tax net and the compliance level will be high. If GST rates are reduced then many small players (unorganised industry players) will also like to comply with the law and would like to pay the taxes rather than tax evasion. This will ultimately increase the collection of taxes to the government,” it said.

According to the International Market Analysis Research and Consulting (IMARC) Group’s Report, the ice cream market in India is expected to reach over ₹43,600 crore by 2027 from over ₹16,500 crore in 2021, exhibiting at a CAGR of 17.69 per cent during the next 5 Years. “This will empower our farmers living in the rural areas and will directly improve their living standards. From our side, we propose to market the products by highlighting the benefits to the rural household and the health benefits of ice cream,” the Association said.

As on date, more than 20 Lakhs people are employed in the ice cream industry in different segments of production, marketing besides more than 1.25 lakh vendors who make a living out of it by selling ice cream vending in strategic locations. Sugar is majority consumed by Ice-cream manufacturing industry. Some 50 million and millions more workers are involved in sugarcane farming. Their livelihood much depends on Ice-cream industry, the Association added.