
Table of Contents
Introduction
The recent GST Council Meeting held at Jaisalmer on 21st December 2024 concluded with some decisions that left the taxpayers confused. One of the key decisions was the levy of GST on caramelised popcorn at 18%. Apart from clarifying what the exact rate structure of popcorn is, this blog will also delve deep into the bureaucratic approach that is being implemented in the GST-related decisions, which is apparently quite contrary to ‘Good and Simple Tax’ and the ‘anti red-tapism’ flags hoisted by the current government.
Rate of GST on Popcorn
Any kind of Popcorn when sold loose – 5%
Salty or any flavoured popcorn except caramel when sold in a packaged form – 12%
Caramelised popcorn when sold in a packaged form – 18%.
It is not that these rates affect the consumption in general. Popcorn is a snack and not a necessity thay prices of which impact general livelihood of people. It is the complexity of rate structure which is being criticised and rightly so, it needs to be.
For some reason, packaged ready-to-eat namkeens are taxed at 12% (saving grace, as they were taxed at 18% until the rate was reduced in 54th GST Council Meeting). Now the thing is, if you sell any savoury item which is salted and has some other spices & flavours in loose form, it attracts 5% GST. So what difference does the branding and packaging make? It is the HSN (Harmonised System of Nomenclature) codes according to which the items are divided into various chapters and headings and specific rates are assigned to them accordingly. HSN codes comply with the international nomenclature system.
Since packaged popcorn is also namkeen, it is taxed under the same heading as other packaged/branded savoury items at 12%.
Caramel popcorn on the other hand, are now taxed at 18% because it has “added sugar”, and foods items with added sugar are taxed at 18%.
Purpose and the Perspectives
What can be the purpose behind taxing sugary products higher than salty products? Is that to encourage people to eat less sugar as India is already a diabetes capital? But how has taxing sugary products high changed the scenario so far? Diabetes cases are on the rise and is now found amongst youngsters as well. Taxing sugary products higher is definitely not an answer to curb people’s tendency to consume more sugar.
What causes more frustration is honourable Finance Minister’s way of looking at these issues. As if the GST Council which consists of all the state finance ministers with the Union Finance Minister as its head wasn’t enough, smaller issues are handed over to Group of Ministers (GoM). These Group of Ministers hold meetings prior to GST council meeting. Now understand how it goes. There’s an issue on the table regarding revision of GST rate or exemption of a particular item. A GoM consisting of state finance ministers is formed to decide on the same. GoM schedules meetings and discusses the same. ‘GoM fails to form consensus’ has been the common outcome of most of these meetings during the second half of 2024. Since GoM doesn’t decide, it cannot submit its report to council. Without GoM, council cannot recommend and without Council’s recommendation, the Union Government cannot roll out the changes or amend the law accordingly. Crucial matters which affect the industry, taxpayers, common citizens, the poor and middle class, ease of doing business, ultimately the economy in general are stuck in this vicious bureaucratic circle. A system which may look comprehensive and democratic prima facie, has all the characters of bureaucracy. A funny scene from the web series Panchayat is very much relatable here.
The frequent meetings of the GoMs and their demand for more time to study on crucial aspects which are already affecting the economy adversely and need to be decided upon, is causing more damage than it is actually helping. Three GST Council Meetings are over, the budget of 2024 came by, the 2025-26 budget is around the corner but the exemption of GST on insurance premia remains unresolved. What did the honourable Finance Minister say in the press briefing after 55th GST Council Meeting regarding this? Some key words were ‘procedure’, ‘multiple aspects’, ‘more time is required’. A bureaucrat turned Finance Minister may have a smooth hand for policy execution and yes, India’s macro economy is doing exceptionally well under her tenure but it is this structural havoc which is making taxpayers lives a living hell. As much stereotypical it may sound but the truth is that the minister who’s not chosen in an election is less likely to be people-centric and might care more about ‘following the procedures’ than actually making things work. The way our Prime Minister Modi ji thinks out of the box and doesn’t really care about rules and procedures if the action has better and positive impact, this aspect is clearly missing in FM Sitharaman. She is indeed an intelligent woman and a very experienced one as well, but she needs to throw the bureaucratic luggage and be more people-centric. Perhaps then we might get to see her not caring about procedures and taking decisions lightning-fast.
But it’s not always Sitharaman. GST Council takes any decision with a consensus from finance ministers of all the states and if the states are not agreeing on something, how can the issue be resolved. This is exactly where a ‘leader’ is required, to form a consensus. State finance ministers can be from opposition parties as well. It is a democratic art to convince the opposition and Modi, Shah Gadkari are the subject matter experts in this thing.
The Litigation Cycle and GST Officers’ Questionable Expertise
There is one more aspect because of which the GST is struggling to be a Good and Simple Tax’ and it is litigation. Small traders get notices. Most of them lack the knowledge about GST portal and have outsourced their GST compliance to CAs and other tax practitioners. If such professionals, out of their inherent limitation, ignore the notices received by clients and forget to inform the client about it, the taxpayers fail to respond to such notice and an order is arbitrarily passed without hearing the taxpayer out. High Courts of almost all states have tired of remanding such matters to adjudicate and appellate authorities for hearing the petitioner. Many times, the authorities pass an erroneous order by applying the wrong provisions of GST law or by not considering taxpayers response. Even the appellate authorities tend to uphold such erroneous orders. High Courts then interpret the law and pass a judgment. This litigation havoc is being caused by the flawed bureaucracy. Let us take a look at how these GST officers are selected.
1. Group A officers are selected through UPSC
2. Group B and C officers are selected through SSC
3. There is no compulsion to have a bachelor’s degree in commerce with taxation as a speciality to be a GST Officer of any rank.
4. The training is provided on the job.
And this, my friends, is the biggest mistake. The authorities in charge of literally shutting down the businesses of taxpayers may or may not have extensive knowledge of the GST law. How and why is it more important to test a would-be GST officer’s history and civics knowledge than to actually recruit an experienced candidate? Why is there no bar of commerce graduation for anyone to be a GST Officer and why are the candidates from other streams even allowed to appear for exams? First of all, why is there not a separate exam altogether with specific qualification and other pre requisites, designed specifically to recruit experienced, well versed and most importantly, legally literate candidates? When are we going to fix literally basic issues which hinder the execution of law in India?
It is not like that people aren’t at fault or that the government gets all the blame. Multiple crores of GST frauds are also being unearthed and DGGI is doing a wonderful job in that regard. But there are some issues hurting the taxpayers and eventually the economy. We need to fix them foremost.
Some Possible Solutions
- Separate recruitment for taxation authorities with commerce graduation as a necessary criteria, disallowing any other stream.
- CA, CS and CMAs should be given preference. The dropouts of such professional degrees having Articleship/Internship experience must also be given higher preference
- The head of GST Council should be some with great leadership qualities. Forming a consensus is a skill required foremost for this post. Nirmala Sitharaman may continue to be the Finance Minister but GST Council should be headed by someone else.
- Substance should be given to impact rather than procedures.
- If GST Council fails to form a consensus on any issue for three meetings in a row, the matter should be handed over to the parliament.
- The members of GST Council should be called out and penalised internally for non cooperation on crucial issues.
There can be more and better solutions, but if only we try to pop the bureaucratic corn, we’ll get to see a really Good and Simple Tax in execution.
Warm Regards,
Dnyanesh Make The DPM
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