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| Photo Credit: BISWARANJAN ROUT

The Congress on Sunday (December 22, 2024) said the “absurdity” of three different tax slabs for popcorn under GST only brings to light the growing complexity of the system and asked whether the Modi government will show the courage to launch a complete overhaul for instituting a GST 2.0.

Congress general secretary in-charge communications Jairam Ramesh also claimed GST evasion is significant, input tax credit fraud is common, and the number of bogus companies set up to “game” the GST system runs into thousands.

“The absurdity of three different tax slabs for popcorn under GST, which has unleashed a tsunami of memes on social media, only brings to light a deeper issue: the growing complexity of a system that was supposed to be a Good and Simple Tax,” he said in a post on X.

“GST evasion is significant, input tax credit fraud is common, and the number of bogus companies set up to ‘game’ the GST system runs into thousands.”

“Tracking of supply chains is weak, the registration process is flawed, advantages are being taken of loopholes in turnover exemptions, compliance requirements are still cumbersome, and misclassification of goods is frequent,” Mr. Ramesh said.

He said the recent data on tax frauds uncovered by the Directorate General of GST Intelligence (DGGI) reveal GST evasion of ₹2.01 lakh crore in FY24.

“With the Union Budget now just 40 days away, will the PM and FM summon the courage to launch a complete overhaul and institute a GST 2.0?” Ramesh asked.

GST Council on Saturday agreed to issue a clarification on taxation of popcorn, saying that pre-packed and labelled ready-to-eat snacks will attract a 12% tax while an 18% GST will be levied if it is caramelised.

There is no change in the tax rate of popcorn and the GST Council has only agreed that the Central Board of Indirect Taxes and Customs (CBIC) will issue a circular clarifying the current taxation regime of popcorn.

‘Ready-to-eat popcorn’, which is mixed with salt and spices, and has the essential character of namkeens currently attracts a 5% GST if it is not pre-packaged and labelled.

If it is supplied as pre-packaged and labelled, a 12% GST is levied.

However, when popcorn is mixed with sugar (caramel popcorn), its essential character changes to that of a sugar confectionary, and would therefore be classifiable under HS 1704 90 90 and attract an 18% GST, as per the clarification.

Jaisalmer (Rajasthan):

Union Finance Minister Nirmala Sitharaman on Saturday announced that the Goods and Services Tax Council has approved the reduction of GST on rice kernels to 5 per cent, exempted life-saving gene therapy from tax, and extended the GST exemption for parts used in manufacturing surface-to-air missiles (SAM).

Addressing the media here after the 55th GST Council meeting, the Finance Minister said the decision to cut GST on rice kernels from 18 per cent to 5 per cent has been taken as the commodity is supplied to the weaker sections of society through the public distribution system.

“Similarly, the concessional 5 per cent GST is applicable on inputs of food preparations that are supplied for free distribution to economically weaker sections under government programs subject to existing conditions; so this is also an extension of the 5 per cent rate that prevails,” she said.

Explaining the rationale for increasing the tax on caramelised popcorn to 18 per cent, the Finance Minister said that these included added sugar which constituted a separate category just like carbonated drinks that are harmful to health and hence, are put under a higher tax slab.

She pointed out that salted and plain popcorn were also being sold in the market and the GST on them had not been increased.

She further stated that black pepper, whether fresh green or black pepper or dried black pepper, and raisins, when supplied by an agriculturist, are not liable to GST. However, if these commodities are sold by merchants, then they would be liable to pay tax.

She also said that all parts used for the manufacture of SAM missiles including software will continue to be exempt from GST.

The Finance Minister also said that while payment aggregators handling transactions below Rs 2,000 are eligible for exemptions, this does not apply to payment gateways and fintech services.

She said that no GST is payable on penal charges or levies collected by banks and NBFCs for non-compliance with loan terms by borrowers. This step would go a long way to help small businesses.

The Finance Minister further stated that the issue of whether there should be a separate GST on delivery charges of food provided by quick commerce companies and e-commerce apps was discussed at the meeting but no decision has been taken in the matter. It was felt by the Council that more detailed discussions were required on the issue, she added.

The Finance Minister also said that ACC blocks containing more than 50 per cent fly ash will attract 12 per cent GST.

Ms Sitharaman disclosed that no decision has been made regarding the inclusion of Aviation Turbine Fuel (ATF) under the GST framework as several states were opposed to the move. Further discussions are expected on the issue in future meetings.

She further stated that the GoM on health insurance has not received inputs from the insurance regulator IRDAI as yet so more time is required to take a decision on the issue.

The GoM on rate rationalisation also needs additional time as the report is yet to be finalised, she added.

The Finance Minister further said that the Council discussed whether the GST on floor space index (FSI) for construction should be on the reverse charge or forward charge. No decision was taken on the issue as it has implications for the revenue of municipalities and besides, land is a state subject.

She also disclosed that a concept note has been given in-principle approval by the GST Council to bring amendments in GST to make registration easier for small companies who avail low input tax credit. These companies are facing problems in registrations and it has been decided to simplify the system to make the process smoother for them.

The Council has approved an amendment to the definition of prepackaged and labelled items intended for retail sale. The step is aimed at clarifying the definition for all goods as currently there is a lot of confusion on the issue, Ms Sitharaman added.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)