Ice cream topping crackle likely to attract 18 per cent GST on AAR ruling

Court held crackle is not intended for direct consumption by users but as an industrial input

The crackle sold to companies for use as toppings on ice creams may now be subject to a higher goods and services tax (GST) rate of 18 per cent, and not 12 per cent.

The Authority for Advance Rulings (AAR) has held that crackle sold to ice cream companies should not be categorised as sugar boiled confectionery but rather as an industrial input.
 

Although the AAR did not specify the applicable GST rate, experts anticipate that it will indeed be 18 per cent, contrary to the applicant’s request for a 12 per cent rate. This decision pertains to a product commonly known as NBS crackle, composed primarily of sugar but also containing ingredients like cashew nuts, butter and glucose.

The applicant primarily supplies this product to ice cream manufacturers such as Hindustan Unilever Ltd and Dairy Classic Ice Creams to be used as a topping for ice creams.
 

The applicant’s argument was based on the classification of the topping as sugar boiled confectionery, which is subject to a 12 per cent GST rate. However, the court held that the product in question is not intended for direct consumption by end users. Instead, it is specifically sold to ice cream manufacturers as an essential industrial input. 
 

Sandeep Sehgal, a partner at AKM Global, a tax and consulting firm, noted that the ruling underscores the significance of considering the ultimate use of a product when determining its classification for tax purposes.