The Goods and Services Tax (GST) Council Meeting, headed by Finance Minister Nirmala Sitharaman invited mixed reaction after it announced that pre-packed and labelled ready-to-eat popcorn will attract a 12 per cent tax while caramelized popcorn would attract an 18 percent GST. On 21st December, the Ministry of Finance, in a release, clarified that “ready to eat popcorn which is mixed with salt and spices are classifiable under HS 2106 90 99 and attracts 5 per cent GST if supplied as other than pre-packaged and labelled and 12 per cent GST if supplied as pre-packaged and labelled. However, when popcorn is mixed with sugar thereby changing its character to sugar confectionary (eg caramel popcorn), it would be classifiable under HS 1704 90 90 and attract 18 per cent GST”.
It further added, “There is no new imposition of any tax in this regard and 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.”
Reacting on this, Harsh Bhuta, Partner, Bhuta Shah & co, said that the 55th GST Council Meeting’s recommendation to impose three different tax rates on popcorn undermines the very foundation of GST, which was designed to promote ease of doing business, compliance, and a simplified tax structure. “This move introduces unnecessary complexity, increases compliance burdens, and is likely to fuel litigation. What starts with popcorn today could easily extend to other products tomorrow, further complicating the tax framework and deviating from the original intent of GST reform,” he added.
Experts also stated that the announcement highlights the need for greater simplicity in GST classifications. Mohammad Asif Mansoory, Partner, Economic Laws Practice, said, “The GST Council’s nuanced classification of popcorn emphasises the complexity of indirect tax law, where even a sprinkle of sugar or salt can lead to significant tax rate differences.” Interestingly, he added, “Popcorn sold at cinemas continues to attract a flat 5 per cent GST as part of restaurant services, creating a contrast with the granular classifications for off-the-shelf products. Businesses will welcome the retrospective regularization, but one wonders if tax law needs a better recipe to avoid such disputes in the future.”
However, others opined that the GST Council’s clarification on applicable tax rates on different popcorn types is yet another step to bring clarity in the foods/ snacks industry. Saurabh Agarwal, Tax Partner, EY, said, “By aligning popcorn’s taxation with its essential characteristics, the Council has removed ambiguities and ensured consistency with the existing structure for savory snacks and confectionery. 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 challenging for multiplexes who have started selling mixed variants of popcorn in a single tub which may now attract 18 per cent GST, thereby increasing the cost for the end customer.”
Garima Kapoor, Economist and Executive Vice President, Elara Securities, said, “Under the GST rules, addition of sugar ends up being treated differently and hence it is critical to treat caramel popcorn differently from salted popcorn. While it may seem too inconsequential, exceptions created for one product can attract exceptions for other products too. Thus, while it may seem trivial, the need for treating different flavoured popcorn differently arises from the principle of progressivity.”
Experts also said that the clarification addresses inconsistencies in field-level interpretations and ensures uniformity without imposing any new taxes. Devika Dixit, Director, Grant Thornton Bharat, said, “To resolve past disputes, the Council has decided to regularize these matters on an “as is where is” basis, providing much-needed relief to businesses in this segment.”
Brijesh Kothary, Partner, Khaitan & Co, said, “Notably, the Advance Ruling Authorities in Maharashtra and Tamil Nadu have determined that popcorn falls under the category “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 per cent. In contrast, the Telangana Advance Ruling Authority has ruled that flavoured popcorn should be classified under Chapter Heading 1904 and taxed at 18 per cent. Therefore, the GST Council’s recommendation will likely need to be evaluated based on the Circular issued by the CBIC in the future.”
Mukesh Pandey, Director of Rupyaa Paisa, said, “In many regions, the tax rates applied to food products, such as popcorn, can vary based on specific characteristics, including whether they are considered essential goods or luxury items. These differences in tax rates reflect policy decisions aimed at balancing public health considerations with economic factors such as revenue generation from luxury items versus the affordability of basic food necessities.”
The 55th GST Council met on December 21st under the Chairpersonship of Union Minister for Finance & Corporate Affairs Nirmala Sitharaman in Jaisalmer, Rajasthan. The meeting was also attended by Union Minister of State for Finance Pankaj Chaudhary, Chief Ministers of Goa, Haryana, Jammu and Kashmir, Meghalaya and Odisha; Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana; besides Finance Ministers of States & UTs (with legislature) and senior officers of the Ministry of Finance & States/ UTs.