Tax Heat May Melt Ice-Cream Makers

Selling an ice-cream is a service as it uses AC,say tax officials.So,it must be taxed more,they say

Is an ice-cream a product or a service Well,you are in for a surprise if you think that its 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 airheating facility in any part of the establishment.Ice -cream, which depends on airconditioning 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 icecream 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 ministers 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. Shah said all ice-cream parlors paid VAT on the full sale price of icecream and VAT returns were fulyy filed with the commercial department for assessment.It is only a trading activity and not service activity .... Ice-cream sold at the outlets would have already suffered central excise duty, he said.

Economic Times, New Delhi, 26-06-2013