GST on Popcorn: Clarifications That Matter
Amid recent debates on the Goods and Services Tax (GST) applied to popcorn, particularly in theatres, the government has clarified that there is no increase in GST rates. This reassurance comes after public outcry and critical remarks from experts like former Chief Economic Adviser (CEA) Arvind Subramanian, who highlighted the perceived complexities in GST classifications.
According to government sources, popcorn served in loose form at theatres will continue to attract a 5% GST rate. This is aligned with the classification under ‘restaurant services’ when sold separately from cinema exhibition services. Thus, there is no impact on the prices of popcorn sold in theatres—a relief for moviegoers nationwide.
Breaking Down the GST Classification for Popcorn
The GST rate on popcorn varies depending on its form and packaging:
| Type of Popcorn | GST Rate |
|---|---|
| Loose popcorn served in theatres | 5% |
| Pre-packaged and labelled popcorn | 12% |
| Ready-to-eat popcorn with spices/salt | 18% |
This differentiation stems from the Harmonised System (HS) classification, a global goods nomenclature system developed by the World Customs Organization (WCO). HS classification ensures standardized taxation across over 200 countries and impacts more than 98% of international trade.
- Loose popcorn: Classified under 5% GST.
- Namkeens (Chapter 21): Attracts 5% GST for non-packaged items and 12% for packaged and labelled products.
Why Was a Clarification Needed?
A request from Uttar Pradesh triggered the need to clarify the GST rate on popcorn mixed with salt and spices, especially in the ready-to-eat category. Such clarifications aim to resolve classification disputes, ensuring businesses understand the applicable GST rates.
The government reaffirmed that the rates depend on the product’s classification under the HS system. For instance:
- Sugar confectionery: Classified under HS 1704, attracts 18% GST unless exempted.
- Namkeens: Classified under HS 2106 90 99, attracts 5% or 12%, depending on packaging.
Popcorn, falling under similar ready-to-eat snack categories, follows this principle for determining applicable rates.
Public Reactions and Expert Criticism
While the clarification resolved doubts, some experts argue that GST’s complexity discourages ease of business. Former CEA Arvind Subramanian criticized GST’s layered structure, claiming it fosters irrational classifications.
However, government sources emphasize that the classification system is necessary for standardization and dispute resolution. By relying on HS codes, GST ensures consistency in taxation but inevitably results in diverse rates for similar products.
Key Takeaways for Taxpayers
- No GST hike on loose popcorn: The rate remains at 5%.
- Pre-packaged popcorn taxed higher: Packaging affects the applicable GST rate.
- Clarifications promote uniformity: Despite criticisms, these updates resolve disputes.
- Global standards apply: HS classification ensures consistency in international trade.
Final Thoughts
The popcorn GST debate underscores the importance of clarity in tax regulations. While complexities exist, government efforts aim to standardize rates and address disputes. For taxpayers, understanding classifications is vital to avoiding compliance issues.