Separate rate for caramelised popcorn draws criticism from economists

"This is a national tragedy, violating the spirit of the Good & Simple Tax the GST was meant to be," says former chief economic adviser Arvind Subramanian

Economists have criticised the decision of the Goods and Services Tax (GST) Council to have an 18 per cent GST for caramelised popcorn, saying it will further complicate the indirect tax system.

 

After the Council meeting in Jaisalmer, the finance ministry in a statement said ready-to-eat popcorn, mixed with salt and spices, attracted a 5 per cent rate and 12 per cent if supplied as pre-packaged and labelled.

 

“However, when popcorn is mixed with sugar thereby changing its character to sugar confectionery (e.g. caramel popcorn), it would attract 18 per cent GST. It has been decided to regularise the issues for the past on “as is where is” basis,” it said.

 

It further noted there was no new imposition of any tax in this regard and was 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,” it added.

 

Former chief economic adviser Arvind Subramanian, who had chaired the committee on possible tax rates under GST in 2015, said: “This is a national tragedy, violating the spirit of the Good & Simple Tax the GST was meant to be. The folly is compounded because instead of at least moving in the direction of simplicity, we are veering to greater complexity, difficulty of enforcement & just irrationality. Sad,” he posted on X.

 

Haseeb Drabu, former finance minister of Jammu & Kashmir, also weighed in with a post on X. “Going back to the days when sales tax rates were different for shoes with laces from shoes without laces. Also for shoes with laces but rubber soles were different. Shoes with leather soles were, of course, much higher! The cosmic issue here is whether caramelised popcorn is to be treated as savoury or as confectionery!!!”  

 

Rathin Roy, former member of the Prime Minister’s Economic Advisory Council, said: “Clumsy, ill-informed GST design and implementation, dissembling on issues like revenue neutrality, administrative ineptitude and bureaucratic gulling of an ill- informed political establishment- The result: comic travesty of a GST. A Grotesque and Trivialised Tax.”

 

However, Union Finance Minister Nirmala Sitharaman, while briefing the media after the Council meeting on Saturday, said the clarification was necessary because food products with added sugar had a uniform and higher GST rate than namkeen food items.

 

“When you talk outside, it looks silly that whether there is so much discussion necessary on popcorn. But when states participate in the discussion at the Fitment Committee, they clearly say we give different treatment to products with added sugar such as carbonated drinks and juice. So till the popcorn is salted or spiced, it is charged at 5 per cent. But when caramelised sugar is added, it is no longer namkeen. That’s why it has a separate rate,” she added.

 

Brijesh Kothary, partner at Khaitan & Co, said the recommendation to provide clarification regarding multiple tax rates on supply of popcorn in different form might not affect the cinema industry or multiplexes since food and beverages sold at the cinemas were covered under the definition “restaurant services” and were liable to GST at 5 per cent without input tax credit. 

Controversy popping  *  Economists view decision to impose 18% tax on caramelised popcorn as overly complex and detrimental to GST’s simplicity

  *  Former chief economic adviser Arvind Subramanian called it a national tragedy, violating the spirit of the good and simple tax the GST was meant to be

  *  Former FM of J&K Haseeb Drabu compared it to the old sales tax rates that were different for shoes with laces and without laces