Looking for expert help with GST and income tax for ice cream parlour owners India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Ice cream is taxed at 5% GST from 22 September 2025 (Notification 9/2025-Central Tax (Rate), Schedule I, S. No. 141). It was 18% before.
- A parlour selling ready-made ice cream supplies goods, not restaurant service, so it can claim input tax credit (CBIC Circular 164/20/2021-GST, para 4).
- Ice cream is excluded from the Rs 40 lakh goods limit. Register once turnover crosses Rs 20 lakh (Rs 10 lakh in some special category States).
- Manufacturers of ice cream can't opt for composition. A parlour that only resells can, at 1% of turnover.
- Section 44AD deems 6% of digital receipts and 8% of cash receipts as profit for FY 2025-26. Moving customers to UPI lowers your deemed profit.
What is the GST rate on ice cream for an ice cream parlour? Ice cream (HSN 2105 00 00) attracts 5% GST from 22 September 2025 under Notification 9/2025-Central Tax (Rate), Schedule I, S. No. 141. A parlour selling ready-made ice cream supplies goods, so it charges 5% and can claim input tax credit. Ice cream sellers must register above Rs 20 lakh turnover, not Rs 40 lakh.
Ice cream sits on its own GST track. The rate dropped from 18% to 5% in September 2025. But ice cream is still on the short list of goods, with pan masala, tobacco and bricks, kept out of the higher Rs 40 lakh registration limit, and its manufacturers are still barred from composition. If you run a parlour, a franchise outlet, a kulfi counter or a small ice cream unit, those three rules decide how you register, what you charge and which scheme you can pick. This guide covers them, then the income tax side for FY 2025-26 (AY 2026-27). If you also sell sweets, read our sweet shop GST and income tax guide. If you run a dairy or milk parlour, our dairy and milk parlour guide covers milk, curd and paneer.
Is your parlour selling goods or restaurant service?
This decides whether you get input tax credit (ITC). CBIC took up the question in Circular 164/20/2021-GST, dated 6 October 2021. Its answer: a parlour that sells already manufactured ice cream, and doesn't cook or prepare it for consumption like a restaurant, supplies ice cream as goods, "even if the supply has certain ingredients of service" (para 4.3). Seating, scooping and serving in a cup don't turn it into a restaurant.
At the time, that meant 18%. Today the goods rate is 5%, with full ITC on the GST your brand supplier, landlord and freezer seller charge you.
Restaurant service is different. It's 5% too (2.5% CGST plus 2.5% SGST), but only if you take no ITC on goods and services used to supply it (Notification 11/2017-Central Tax (Rate), S. No. 7(ii), as substituted by Notification 20/2019-Central Tax (Rate)). If your outlet cooks waffles, makes sundaes to order or serves snacks, part of what you sell may be restaurant service. A mixed outlet should map its menu item by item before deciding what to bill. Our restaurant and cafe owners guide covers the restaurant side.
Comparison
GST Rates an Ice Cream Business Meets (from 22 September 2025)
| Item | HSN or entry | GST | Input tax credit |
|---|---|---|---|
| Ice cream and other edible ice | 2105 00 00 | 5% | Yes |
| Wafer cones, cakes, pastries | 1905 | 5% | Yes |
| Chocolates and cocoa preparations | 1806 | 5% | Yes |
| Condensed milk, milk with added sugar | 0402 | 5% | Yes |
| Fresh, pasteurised and UHT milk | 0401 | Nil | Not applicable |
| Freezers and refrigerating equipment | 8418 | 18% | Yes, as capital goods |
| Restaurant service (not in specified premises) | 11/2017-CT(R) S. No. 7(ii) | 5% | No |
Source: Notification 9/2025-Central Tax (Rate): Schedule I S. Nos. 4, 116, 123, 141; Schedule II S. No. 407. Notification 10/2025-Central Tax (Rate) S. No. 15. Notification 20/2019-Central Tax (Rate).
When does an ice cream parlour need GST registration?
Most shops that sell only goods can stay unregistered up to Rs 40 lakh of turnover, under Notification 10/2019-Central Tax. Ice cream sellers can't. The notification excludes "persons engaged in making supplies of" the goods in its table, and S. No. 1 of that table is ice cream and other edible ice (2105 00 00). The exclusion covers anyone supplying ice cream, not just manufacturers, so a parlour reselling a brand is caught too.
That leaves the basic limit in Section 22(1) of the CGST Act: Rs 20 lakh of aggregate turnover in a financial year, or Rs 10 lakh if you supply from a special category State that hasn't raised its limit. Once you cross it, apply within 30 days (Section 25(1)).
Say your parlour sells Rs 1,80,000 a month. Over twelve months that's Rs 21,60,000. A clothing shop with the same sales could stay unregistered. You can't.
Two more triggers apply regardless of turnover. Any inter-State taxable supply needs registration (Section 24(i)). So does a small ice cream unit that sells to a parlour in the next State. Our GST registration service handles the application and the documents.
Step-by-Step Guide
GST Setup for an Ice Cream Business
Decide what you are
Reseller of ready-made ice cream, manufacturer, or outlet that also cooks or prepares food. Each has different scheme options.
Track turnover against Rs 20 lakh
The Rs 40 lakh goods limit doesn't apply to ice cream. Register within 30 days of crossing Rs 20 lakh, or straight away if you sell to another State.
Pick composition or regular
Resellers with turnover up to Rs 1.5 crore can compare 1% composition with 5% plus ITC. Manufacturers must use the regular scheme.
Bill and file
Regular: tax invoice at 5% with HSN 2105, then GSTR-1 and GSTR-3B. Composition: bill of supply with no GST charged (Section 31(3)(c)), then the composition returns.
Source: Sections 10, 22, 24, 25 and 31, CGST Act; Notifications 10/2019-Central Tax and 14/2019-Central Tax; Rule 7, CGST Rules
Composition or regular: which leaves your parlour more money?
If you make ice cream, there's no choice. Section 10(2)(e) bars a manufacturer of notified goods from composition, and Notification 14/2019-Central Tax lists ice cream (2105 00 00) at S. No. 1. That covers a unit churning ice cream for wholesale and a parlour that makes its own gelato or kulfi on site. Later amendments to that table (Notifications 43/2019, 04/2022 and 16/2022) dealt with aerated waters and bricks and left ice cream where it was.
If you only resell, you can opt in when the previous year's turnover was up to Rs 1.5 crore (Rs 75 lakh in the States listed in the notification's first proviso) and you make no inter-State sales (Section 10(2)(c)). You pay 0.5% CGST plus 0.5% SGST, so 1% of turnover of taxable supplies (Rule 7, CGST Rules, S. No. 3). You can't charge GST on your bill and you lose all ITC.
Here's how the numbers work for one month. You sell Rs 5,25,000 at the counter. You buy stock for Rs 3,50,000 plus 5% GST (Rs 17,500), and your landlord bills Rs 40,000 rent plus 18% GST (Rs 7,200).
| Regular scheme | Composition | |
|---|---|---|
| Tax on your sales | Rs 25,000 GST (5/105 of Rs 5,25,000) | Rs 5,250 (1% of Rs 5,25,000) |
| Input tax credit | Rs 24,700 (Rs 17,500 + Rs 7,200) | None |
| GST you pay the government | Rs 300 | Rs 5,250 |
| Left after stock, rent and GST | Rs 1,10,000 | Rs 1,05,050 |
Regular leaves you Rs 4,950 more a month, or Rs 59,400 a year. Now take away the GST on rent. With Rs 40,000 rent and no GST on it, regular leaves Rs 1,10,000 and composition leaves Rs 1,12,250, so composition wins by Rs 2,250 a month.
The rule of thumb on 5% goods: the regular scheme costs you 4.76% of your GST-inclusive sales minus your ITC. Composition costs 1%. So composition wins when your monthly ITC is below about 3.76% of sales. In the first case ITC was 4.70% of sales; in the second, 3.33%. A new freezer bought with 18% GST pushes you towards regular. If your landlord is unregistered, check whether reverse charge applies to your rent in our GST on rent guide. Our composition scheme guide explains how to opt in or out.
How is a parlour's income taxed for FY 2025-26?
Presumptive tax. A resident individual, HUF or partnership firm (not an LLP) can declare profit under Section 44AD of the Income-tax Act 1961 if turnover is up to Rs 2 crore, or up to Rs 3 crore where cash receipts are within 5% of the total. Deemed profit is 6% of receipts by account payee cheque, bank transfer or other prescribed electronic mode, and 8% of the rest. From tax year 2026-27 this is Section 58(2), Table S. No. 1, of the Income-tax Act 2025, with the same limits and rates. Our Section 44AD guide covers the details.
Example (FY 2025-26, new regime): a parlour owner turns over Rs 90 lakh. Rs 72 lakh came by UPI and card, Rs 18 lakh in cash.
- Deemed profit: 6% of Rs 72,00,000 (Rs 4,32,000) plus 8% of Rs 18,00,000 (Rs 1,44,000), so Rs 5,76,000.
- Tax under Section 115BAC(1A): nil up to Rs 4 lakh, then 5% of Rs 1,76,000, so Rs 8,800.
- Income is under Rs 12 lakh, so the Section 87A rebate (up to Rs 60,000 for AY 2026-27) wipes it out. Tax payable: nil, if this is the owner's only income.
The 8% rate on cash receipts matters more as the parlour grows. Every Rs 10 lakh moved from cash to UPI cuts deemed profit by Rs 20,000.
The five-year lock. If you declare 44AD profit one year and then declare a lower profit in any of the next five years, you lose 44AD for the following five years (Section 44AD(4)). In that period you must keep books and get them audited if your income is above the basic exemption limit (Sections 44AD(5) and 44AB(e)). Outside 44AD, a tax audit applies above Rs 1 crore turnover, or Rs 10 crore if cash receipts and cash payments are each within 5% (Section 44AB(a)).
TDS on shop rent. If the parlour is run by a company or firm, or by an individual or HUF whose business turnover was above Rs 1 crore in the previous year, you deduct 10% TDS on shop rent above Rs 50,000 for a month (Section 194-I for FY 2025-26; Section 393(1), Table S. No. 2(ii) of the 2025 Act, with "specified person" defined in Section 402(37)). Our TDS on rent guide covers the 2% rule for smaller tenants, and our TDS filing service files the quarterly returns.
Missed the deadline? A belated return for AY 2026-27 can be filed until 31 December 2026 (Section 139(4)). The late fee is Rs 5,000, or Rs 1,000 if total income is up to Rs 5 lakh (Section 234F). See our belated and revised return guide.
Common mistakes ice cream parlour owners make
- Waiting until Rs 40 lakh to register. Ice cream is on the excluded list. Your limit is Rs 20 lakh.
- Still charging 18%. The rate on ice cream has been 5% since 22 September 2025. Update your billing software and printed menu.
- Opting for composition while making ice cream in-house. Churning your own gelato or kulfi makes you a manufacturer, and manufacturers of ice cream are barred.
- Treating the whole outlet as a restaurant. Selling ready-made ice cream is a supply of goods with ITC. Billing it as restaurant service throws that credit away.
- Choosing composition without counting rent GST. If your landlord charges 18% GST, the lost credit can make composition the costlier option.
How Tax Garden helps ice cream businesses
We work out whether composition or the regular scheme leaves your parlour more money, using your actual purchase and rent bills. We register you through our GST registration service, file your regular or composition returns through our GST return filing service, and prepare your return under Section 44AD or on actual profit through our ITR filing service.
