Context: The Goods and Services Tax (GST) Council’s move to tax popcorn differently based on its sugar or spice content has drawn criticism from the opposition and sparked social media outrage, with two former government economic advisers questioning the tax system introduced in 2017.
Relevance of the topic:
Prelims: Key aspects of GST.
Mains: GST- Benefits & Challenges.
GST on Popcorn
- The GST Council announced different tax rates for popcorn based on its sugar or spice content.
- Following are the new differential rates, which come into effect immediately:
- Non-branded popcorn mixed with salt and spices - 5% GST
- Pre-packaged and branded popcorn- 12% GST
- Caramel popcorn- 18% GST
- Until now, popcorn was taxed differently across States.
- Rationale behind 18% tax on caramel popcorn: Popcorn with added sugar (caramel) is categorised as a sugar confectionery, thus attracting a higher tax rate under GST.
Criticism: The GST system has run into similar controversies in the past, like taxing chapatis differently from layered flatbreads, different rates for curd and yogurt, and cream bun versus bun and cream served separately.
- Complexity of GST: Differential tax rates for similar products questions the rationale behind introducing GST to simplify indirect tax regime.
- Inconvenience to citizens: Calculating differential taxes can become very difficult for common people.
- Difficulty in enforcement: Already existing loopholes in GST implementation can be widened with differential taxation rates.
Taxes consumed under GST:
| Central Taxes | State Taxes |
| Central Excise Duty | Sales Tax/VAT |
| Additional Excise Duty | Central Sales Tax |
| Excise Duty under Toilet and Medicinal Preparation | Octroi Duty |
| Additional Customs duty | Purchase Tax |
| Service Tax | Tax on Advertisements |
| Krishi Kalyan Cess | Tax on Lotteries & Gambling |
| Swachh Bharat Cess | Entertainment Tax |
Benefits of GST:
- For Taxation System:
- Simple, Efficient, Transparent: GST has streamlined indirect tax structure by subsuming multiple taxes (subsumed 17 taxes and 13 cesses) into a single tax.
- With uniform tax on supplies of goods and services, India turned into one market.
- Record GST collections & doubling of tax base: from 60 lakh to 1.2 crores (in 2022).
- Parity on imported & local goods.
- For Industries:
- Reduced compliance burden.
- Boost MSME sector through GST Compensation Scheme.
- Greater formalisation of the economy.
- For Consumers:
- Average tax rates have reduced.
- More than 50% of Goods and Services in CPI comes under the exempted category.
- For Logistics sector:
- Reduce traffic congestion at Inter-state borders. Reduced petrol and diesel consumption.
Challenges with GST:
- Multiplicity of tax rates adds to complexity.
- Controversy over GST Compensation mechanism.
- Delays in GST Refunds.
- Implementation challenges due to loopholes, exemptions and differential tax rates for similar products.
Also Read: Challenges in GST Implementation