In the recently concluded 55th GST Council Meeting held on 21/12/2024, the Council gave a Clarification regarding the GST rates applicable on various types of popcorn, a light edible item mostly consumed in movie theaters, restaurants, etc. Ever since the clarification has been released to the public, there has been a huge uproar over the charging of different rates for different flavors of popcorn. Most of the social media is filled with memes mocking the complex structure of multiple rates. of GST on a simple food item. The Finance Ministry has also been targeted regarding its penchant for tax collection through simple consumable products.
However, does one tend to go to find the deep lines of this Clarification where one can easily find out how unwarranted the criticism is being passed on to the Finance Ministry, which is trying so hard to maintain a harmonized structure of indirect taxation at the same time as maintaining the revenue stream? It has been clearly specified that there is no new imposition of GST on a particular flavor of popcorn. whatsoever. Let us find out what exactly the press release by the Central Board of Indirect Taxes & Customs (CBIC) says about the popcorn issue. It is included in Point 5 of the section "Other Changes. to Goods & Services" and is as follows:
"To clarify that ready-to-eat popcorn, which is mixed with salt and spices, is classifiable under HS 2106. 90 99 and attracts 5% GST if supplied as other than pre-packaged and labelled and 12% GST if supplied as pre-packaged and labelled. However, when popcorn is mixed with sugar, thereby changing its character to sugar confectionary (e.g., caramel popcorn), it would be classifiable under HS 1704 90 90. and attract 18% GST. It has been decided to regularize the issues for the past on an "as is where is" basis.
(Note: There is no new imposition of any tax in this regard, and it is merely a clarification as certain field units were demanding different tax rates on the same. Therefore, it is a clarification being recommended by the GST Council to settle the disputes arising out of interpretation.)"
So, it is clearly mentioned in the beginning itself that it is a clarification, and at the end, it has been explained that there is no new imposition of any tax in this regard. Furthermore, this clarification has been specifically provided at the request of one of the State Government as it sought a clarification on the different rates applicable to popcorn based on its flavors.
Hence, the different tax rates based on flavors of popcorn have already been levied, and a clarification has been issued to reach a correct and precise interpretation of the law and avoid any confusion. It is crystal clear that all the GST rates on various types of popcorn are already in place. Even if one were to argue that it has been made unnecessarily complex and with the revenue implications not so material for the Finance Ministry, still it may be justified since the ingredients used in the making of various flavors of popcorn are taxed at different rates. As provided in the above-mentioned clarification, There is a different HSN code when any item is mixed with sugar. Once sugar is added to any product, it becomes a sugar confectionery and must be classified under a different HSN code with a different rate of GST is applicable.
In the case of popcorn, salty popcorn is sold as namkeen (salty, unbranded savories) caramelized popcorn. comes with added sugar, which changes its nature from namkeen to sugar confectionery. Thus, the tax treatment also changes. This is applicable not only in the case of popcorn but also carbonated or aerated drinks, juices, or any other savory where sugar is added, including milk. For milk that is exempt from GST when sold as fresh milk or pasteurized milk where no sugar is added; however, for milk with cream, concentrated or containing any sweetener, including skimmed milk powder or milk food for babies, is classified under the 5% GST slab.
Furthermore, condensed milk is taxed at 12%. Hence, the GST rates for milk differs based on its components and flavor. Certain beverages that contain milk are also taxed. differently under the GST.
When popcorn is caramelized and not salty, it will be classified under a higher tax slab under GST as provided in the GST law. There is nothing new under the sun. It is just that a consumable taxed at a Lower rates shall be taxed at a higher rate when sugar is added to it. Even if there are different tax rates for popcorn, it has been clarified by the Finance Ministry that the popcorn served in loose form in movie theaters will continue to be taxed at 5%, and even if the caramelized version is taxed at a higher rate, it should not be an issue since that is the intent of the legislature.
When it comes to simplicity in indirect taxation, one cannot simply make a case that the system is complex due to the inclusion of various rates. These rates have been fixed after providing a proper classification and considering the different types of components used to manufacture the same. As the components are classified and taxed at different rates, the finished product will also be taxed differently. The clarification provided by the Council has made matters clear for the suppliers of an edible item to ensure proper compliance with the law and legitimate tax collection to the exchequer. Lastly, to answer the question, "Who moved my popcorn?" It is: Nobody.
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