GST on Popcorn: All You Need to Know About New Tax on Movie Snacks

Popcorn has always been a favorite companion during movie nights. But recently, it has become the center of discussions about taxation. The 55th GST Council’s decisions on how popcorn is taxed have made headlines, sparking debates, memes, and questions. What’s really going on? Let’s Analyze it in simple terms.

Popcorn Sold in Loose Form: No Change Here

If you’re someone who buys popcorn in its plain, loose form at the theater, there’s nothing to worry about. The GST rate on loose popcorn remains 5%, the same as food served in restaurants. This means the price you pay for your salted or spiced popcorn at the theater will not change. It’s business as usual for this classic snack.

Popcorn Bundled with Movie Tickets

Things get a little tricky when popcorn is sold as part of a combo deal with your movie ticket. In such cases, the transaction is treated as a “composite supply” under GST rules. This means that the tax rate for the entire package is decided by the main item, which is the movie ticket.

For example:

• If your movie ticket attracts 12% GST, the popcorn in the combo will also be taxed at 12%.
• If the ticket’s GST rate is 18%, the combo will be taxed at 18%.

This could mean that popcorn bought as part of a bundle might cost more than when purchased separately.

Flavored and Pre Packaged Popcorn: Different Rates

Popcorn doesn’t just come in one form. It’s sold loose, prepacked, or with added flavors. Each of these categories has a different GST rate:

• Loose popcorn with salt and spices: Taxed at 5%, the same as other savory snacks like chips or namkeen.
• Pre Packaged and labeled popcorn: Taxed at 12%. This applies to popcorn sold in sealed packets, as it is treated like other packaged food items.

This difference in rates means that packaged popcorn is more expensive than loose popcorn because of the higher tax.

Caramelized Popcorn:

Caramelized popcorn which has added sugar falls into an entirely different category. It is taxed at 18%, as it is treated as a sugar-based product, similar to candies and sweets.

The reasoning? Anything with added sugar is taxed at a higher rate under GST rules. So, caramelized popcorn is no longer considered a basic snack but is instead categorized alongside sugar confectionery like chocolates or sweetened drinks.

How Does This Compare to Other GST Challenges?

Popcorn’s GST story isn’t unique. India’s tax system has faced similar challenges with other products. For example:

Coconut oil: In some states, coconut oil is used for both cooking and hair care. Edible coconut oil is taxed at 5%, but hair oil is taxed at 18%. This led to years of legal disputes until the Supreme Court ruled that if the product is labeled "edible," it should be taxed at 5%, regardless of its use.

These kinds of classification issues show how complex GST can get, even for everyday items.

Clarifying the Confusion

Finance Minister Nirmala Seetharaman during the GST Council press meeting explained that they used the Harmonized System Code (HS Code) to decide the tax rate. This is a global system for categorizing goods and deciding their tax rates. For popcorn, the HS Code helps classify salted, spiced, caramelized, and prepacked varieties, ensuring that each type is taxed appropriately.

What Does This Mean for Vendors and Consumers?

For vendors, the new GST rates add complexity. They need to carefully categorize their popcorn, whether it’s loose, prepacked, or caramelized to ensure they apply the correct tax. This can create administrative challenges, especially for businesses selling multiple types of popcorn.

For consumers, the impact depends on what type of popcorn they choose:

• Loose popcorn remains affordable at 5% GST.
• Packaged popcorn will cost more due to the 12% GST.
• Caramelized popcorn will be the priciest, with an 18% GST rate.

If you’re buying popcorn as part of a movie ticket combo, the tax rate will depend on the GST rate of the ticket, making the pricing less straightforward.

What Are People Saying?

The new GST rules on popcorn have sparked reactions from all sides:

Social Media: Memes and jokes about the popcorn tax are everywhere. People are asking questions like, “What happens if I buy a mixed-flavor pack with caramel and salted popcorn?”

Experts: Some have criticized the move, saying it makes GST more complicated. A former Chief Economic Adviser called it a "national tragedy," arguing that GST was meant to simplify taxes, not complicate them further.

World Bank: The World Bank has previously highlighted how India’s multiple GST slabs (5%, 12%, 18%, and 28%) make compliance difficult for businesses, particularly small ones.

Finance Minister Nirmala Sitharaman defended the decisions, explaining that every tax rate is carefully deliberated. She clarified that items with added sugar, like caramelized popcorn, are taxed consistently with other sugary products.

Conclusion of a Crunchy Debate

For moviegoers, this means your popcorn could cost more depending on how it’s packaged or bundled. For vendors, it adds another layer of responsibility to ensure compliance with GST rules.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates