Is an ice-cream a product or a service? Well, you are in for a surprise if you think that it's a product. The tax authorities feel that the ice-cream served by the likes of Amul, Vadilal, Kwality Walls, Baskin Robbins and a host of others retail vends or parlours constitute a service and should be taxed accordingly.
The logic - it is served from air-conditioned facilities.
The budget this year brought under tax the services provided in relation to food or beverages served by a restaurant, eating joint or a mess having air-conditioning or central air-heating facility in any part of the establishment.
Ice -cream, which depends on air-conditioning for its very existence, naturally meets this condition.
The Central Board of Excise and Customs, the apex indirect taxes body under the ministry, is still to issue a directive on implementation of the budget provision. However, field officials, under pressure to meet collection targets, are taking no chances and have turned the heat on ice-cream manufacturers.
The industry finds itself in a precarious situation. Hit hard by rising raw material costs, it is unable to absorb the burden of double taxation.
Ice-cream also attracts value added tax and excise duty, being a manufactured good.
The industry has represented to the CBEC to give clarity on treatment of ice creams as good or service.
The implication of the new levy has been examined by finance minister P Chidambaram and the CBEC is now looking if there is a need to clarify the issue. Ice-cream manufacturers are planning to now take up the issue with finance minister's office.
"This is a double whammy...Ice cream industry cannot function without air conditioned plant or without AC storage," said Sudhir Shah, secretary, Indian Ice Cream Manufacturers Association.
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