DECEMBER 23, 2024

By B N Gururaj, Advocate

AFTER the conclusion of the 55th GST Council meeting, a Press Release was issued by the Press Information Bureau. In page 4, item 5 caught my attention. Humble Popcorn figures there. GST Council has clarified that Salted and spiced Popcorn without prepacking is chargeable to 5% GST. Same Popcorn when packed and labelled is chargeable to 12% GST. If it is sweetened, it is chargeable to 18% GST.

I do not know how much tax revenue the humble Popcorn yields for the Government. Neither the GST council, nor the tax bureaucrats who guided it to issue this clarification have condescended to disclose how much increased revenue will come out of the three distinct rates of tax. This is not an impossible task. Before the GST era, the finance minister would disclose this information in the budget speech: how much revenue would be lost on account of a new exemption or concession, and how much revenue would be earned by a new proposal of duty, or tinkering with the rates of duty.

Be that as it may, the reason given for giving special treatment to Caramel Popcorn is that upon sweetening, Popcorn becomes a sugar confectionery under HS 1704 90 90. This is a residuary entry. Therefore, there was no legal compulsion to treat Caramel Popcorn as sugar confectionery. In common parlance, sweetened Popcorn would still be known as Popcorn. At least, there are no judicial precedents which require classifying Caramel Popcorn as sugar confectionery.

Secondly, under chapter heading 21.06 under which spiced and salted Popcorn is classified, there is no bar against classification of sweetened preparation. In fact, HSN Explanatory Notes list many such sweetened preparations under Heading No. 21.06. So, to keep the matters simple, Caramel Popcorn also could have been subjected to lesser tax instead of 18%.

Thirdly, merely because seasoned Popcorn is pre-packed and labelled, it need not be charged to 12%. Government certainly has the discretion to retain 5% GST notwithstanding pre-packing and labelling.

This is clearly a case of throwing out of window the policy of ease-of-doing-business, in favour of raising petty revenue.

A few months back, a video went viral in which a restaurateur in Coimbatore humorously explained to the Union Finance Minister the difficulties faced by him on account of diverse rates of GST on the food served to customers. Amongst the many illustrations he gave this was one instance: "Bun with cream attracts 18% GST. So, the customer says give me bun and cream separately. I will apply it."

For good measure, the recommendation states that there is no new imposition of tax, but it is only a clarification. Evidently, three different rates have caused problem in the field. Hence, this clarification has been issued. But clarifications are supposed to resolve the issues, not perpetuate them by retaining the cause of problem. The lesson has not been learnt. Now we find one item subjected to three rates of tax.

[The views expressed are strictly personal.]