Ice cream companies are optimistic about a potential reduction in the Goods and Services Tax (GST) rate, believing it will make ice cream more affordable and boost demand. This anticipated change is especially pertinent following recent elections, as industry leaders hope for favorable economic policies from the new government.
Lobbying for Lower GST Rates
To achieve a lower GST rate, ice cream manufacturers have actively lobbied key government officials. The Indian Ice-Cream Manufacturers’ Association has submitted a formal request to the President, who has passed it on to the Finance Ministry. The request urges the GST Council to consider reducing the GST on ice cream from the current 18% to 5%.
Current Tax Discrepancies
Presently, ice cream sold in shops or parlours attracts an 18% GST. However, when bundled with food services in hotels or restaurants, it is taxed at 5%. This inconsistency is seen as unfair by the ice cream industry. A uniform 5% GST rate, they argue, would significantly lower prices and increase consumption.
Comparison with Global Consumption
The association highlights the low per capita consumption of ice cream in India. An average Indian consumes just 400 millilitres of ice cream annually, compared to 28.4 litres in New Zealand, 20.8 litres in the USA, and 18 litres in Australia. Lowering the GST rate would make ice cream more accessible, potentially increasing these figures.
Ice Cream as a Dairy Product
Ice cream is a dairy product, yet it is taxed at a higher rate compared to other dairy items. Milk attracts no GST, while products like paneer, curd, lassi, yoghurt, and buttermilk are taxed at 5%. Since most raw materials for ice cream are either animal or agriculture-based, and taxed at lower rates, the industry argues that ice cream should also benefit from a reduced GST rate.
Benefits to the Unorganized Sector
A significant portion of the ice cream industry operates in the unorganized sector. Lowering the GST to 5% could encourage these smaller businesses to comply with tax regulations, increasing overall tax revenue. It would also help these enterprises grow, boosting employment and economic stability.
Economic Impact and Market Growth
According to the IMARC Group’s Report, the Indian ice cream market is projected to grow from ₹16,500 crore in 2021 to over ₹43,600 crore by 2027, with a CAGR of 17.69%. This growth will benefit rural farmers and improve living standards by providing a stable market for agricultural products used in ice cream production.
Employment and Livelihood
The ice cream industry currently employs over 2 million people across production, marketing, and sales. Additionally, more than 125,000 vendors rely on selling ice cream for their livelihood. The industry is also a significant consumer of sugar, which supports millions of workers in sugarcane farming. A reduction in GST would not only benefit these workers but also enhance the overall economic ecosystem related to the ice cream industry.
Conclusion
A reduction in the GST rate on ice cream is expected to have far-reaching benefits. It will make ice cream more affordable, increase consumption, support small businesses, and boost the economy. The Indian Ice-Cream Manufacturers’ Association continues to advocate for this change, emphasizing its potential to enhance the industry’s growth and contribute to economic prosperity.