GST rates for Popcorn under the direction of Union Minister for Finance & Corporate Affairs Nirmala Sitharaman, the 55th GST Council took place at Jaisalmer, Rajasthan, on December 21st 2024. In addition to senior officials from the Ministry of Finance & States/UTs, the meeting was attended by the chief ministers of Goa, Haryana, Jammu and Kashmir, Meghalaya, and Odisha; the deputy chief ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana; and the union minister of state for finance, Pankaj Chaudhary.
It made the announcement that caramelized popcorn will be subject to a 18% GST and packed and labeled ready-to-eat popcorn to a 12% tax, the Goods and Services tax (GST) Council Meeting, headed over by Finance Minister Nirmala Sitharaman, resulted a range of responses.
“Ready-to-eat popcorn that is mixed with salt and spices are classifiable under HS 2106 90 99 and attract 5% GST if supplied as other than pre-packaged and labeled and 12% GST if supplied as packed and labeled,” the Ministry of Finance clarified in a release on December 21. But if popcorn is combined with sugar, turning it into a sugar treat (like caramel popcorn), it would fall under HS 1704 90 90 and attract 18% GST.
“This is just a clarification as some field units were requesting different tax rates on the same goods, and there is no new tax imposition in this regard.” Therefore, the GST Council is recommending this clarification to resolve any interpretation-related conflicts.
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In response, One of the expert, stated that the proposal to impose different tax rates on popcorn at the 55th GST Council Meeting goes against the fundamental principles of GST, which were intended to facilitate compliance, freedom of doing business, and a streamlined tax system. This action adds inappropriate complexity, raises the burden of compliance, and is probably going to lead to more lawsuits. The tax system could become much more complicated and depart from the original goal of the GST reform if what begins with popcorn today spreads to other goods tomorrow, he added.
The announcement, according to experts, emphasises the necessity of making GST classifications more straightforward. “The GST Council’s nuanced classification of popcorn highlights the complexity of indirect tax law, where even a sprinkle of salt or sugar can lead to significant tax rate differences,” stated by expert. Intriguingly, they continued, “In contrast to the detailed classifications for off-the-shelf products, popcorn sold at movie theatres continues to be subject to a flat 5% GST as part of restaurant services.” The retroactive regularization will be welcomed by businesses, but it is unclear if tax law requires a better formula to prevent future disputes of this nature.
Others, however, believed that the GST Council’s clarification of the applicable tax rates on various types of popcorn was just another step towards bringing clarity to the foods and snacks industry.
According to another expert, “The Council removed ambiguities and ensured consistency with the existing structure for savoury snacks and confectionery by aligning popcorn’s taxation with its essential characteristics. These are not new taxes but refinements to ensure proper classification within the tax framework. This step will aid manufacturers, retailers, and consumers by providing clear guidelines and reducing potential disputes in tax compliance. However, the same can be hard on multiplexes that have started selling mixed variants of popcorn in a single tub, which may now attract 18% GST, thereby raising the cost for the end customer”
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Another expert noted, “It is important to handle caramel popcorn differently from salted popcorn since the GST regulations interpret the addition of sugar differently. Even though it might not seem like much, making an exception for one product might lead to making exceptions for other products as well. As a result, even if it might appear insignificant, the concept of progressivity justifies treating different flavours of popcorn differently.”
Experts added that the clarification guarantees uniformity and resolves discrepancies in field-level interpretations without taxing additional charges. “The Council has decided to regularise these matters on a “as is where is” basis to resolve past disputes, providing much-needed relief to businesses in this segment,” stated by expert.
According to a professional,” popcorn is classified as “Fruit, nuts, and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit” under Chapter Heading 2008, where the tax rate is 12%. This is noteworthy according to the Advance Ruling Authorities in Tamil Nadu and Maharashtra. The Telangana Advance Ruling Authority, on the other hand, has decided that flavor-infused popcorn need to be categorised under Chapter Heading 1904 and subject to an 18% tax. As a result, in the future, the CBIC’s circular will probably need to be used to assess the GST Council’s suggestion.”
“The tax rates applied to food products, like popcorn, can vary depending on specific characteristics, such as whether they are considered essential goods or luxury items,” the tax specialist stated. These variations in tax rates are the result of policy choices meant to strike a balance between economic reasons, such as the affordability of basic food necessities and the money generated from luxury goods, and public health issues.
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