At its 55th meeting, the GST Council fixed the varied tax rates on different categories of popcorn. The ready-to-eat popcorn, which is typically mixed with salt and spices, attracts a 5% GST if it is not pre-packaged or labelled and a 12% GST if it is pre-packaged and labelled. The caramelized popcorn, which is coated with sugar, is classified as a sugar confectionery and attracts an overwhelming18% GST.

Well! This humble snack which is consumed in generous amount especially during winters has suddenly got famed by application of this extra indirect tax. The finance minister clarifies that since it is sugar coated, it no longer remains a namkeen and can be classified as a sugar confectionery product, which are charged at 18%.

When the Indian tax system needs simplification, here the authorities are developing further slabs by creating a sub-sub category of the same product. A maze or a corn is further classified into three categories based on the way it is consumed and sold in the market. This is certainly creating a story similar to the bun (5% GST), the cream (5% GST) and the sweet delight cream-bun (18% GST). The simple act of classifying popcorn now involves determining whether it's plain, flavoured, branded, pre-packaged or contains sugar. This creates confusion for both businesses and consumers and in turn impacts the ease of doing business and then the economy. Businesses must now navigate these intricate classifications, potentially leading to increased compliance costs, record-keeping challenges and a higher risk of errors.

Precisely taxing goods like sugar-coated items can be a significant source of revenue for government, which they can then use to fund public services. However, it’s certainly a pinch in the pocket of a common man. Caramelized popcorns is a comfort yet delicious food item that popularly circulates in the market. Already due to inflation, the food prices is too high. Over and above that, an additional mandatory charge makes consumers liable to pay a higher price. Especially the youth and the middle class, who are already struggling with issues like rising inflation and unemployment, have to bear this additional cost to eat a product like popcorn.

The basis of this additional GST of 13% are sugar and salt. Whether caramelized or salted or spicy? However, the market does contains flavours like ‘sweet and salty’, what are the criteria of taxation for this sub-category? Are there soon going to be taxes on every small sweet item? For instance, chewing gum, sugar rush for taxman? The 5% GST on it may soon become 18%!

Such endeavours often open floodgates for practices like tax evasion. The recent data on tax frauds uncovered by the Directorate General of Goods and Services Tax Intelligence (DGGI) reveal GST evasion of ₹2.01 lakh crore in FY24. Businesses may underreport their sales of caramelized popcorn to reduce their tax liability. Mislabelling could be another such issue. The difference in tax rates could encourage a shift towards an informal market where caramelized popcorn is sold without proper invoicing or tax records.

This indirect tax ultimately burdens ordinary citizens who derive no benefit from it. A small indulgence like caramelized popcorn shouldn't face such a heavy tax burden. It's absurd that a once-affordable snack has become a luxury item, thanks to excessive taxation. A luxury? 50-100g of joy shouldn't break the bank! This shortsighted policy could ultimately backfire, as rising prices may soon drive consumers away from this popular treat. Sugar coated popcorn, a pricey perfection?

Dr. Jain is Assistant Professor, Shyam Lal College, University of Delhi, and Visiting Fellow, Pahle India Foundation. Er Gupta is a seasoned technocrat based in Delhi.