After parotas, now ready-to-eat popcorns to attract 18% GST

The question was raised to AAR regarding the classification of popcorn under the Harmonized System of Nomenclature (HSN) and the applicable GST rate. In its submission, the applicant submitted that popcorn is nothing but corn/maize, which is a cereal and the applicable GST rate is 5 percent.

Relying on the past judgment of the apex court in Central Sales Tax Act, the applicant contended that a cereal grain, even after applying a process of heating, does not lose its basic characteristics and thus it remains the same cereal grain and further contended that the use of negligible quantity of oil is only for the purpose of sticking the salt and turmeric on the maize/corn, and not for cooking/frying.

However, the AAR observed that popcorn, after heating and adding ingredients, is ready-to-eat prepared food and fits the description as 'Prepared foods obtained by the roasting of cereal', which attracts GST at 18 percent.

The AAR further observed that since the applicant's product loses the presence of grain in it, it does not deserve to be classified as cereal.

Experts see such ruling from AAR as a fresh case of getting more clarity in the newly-drafted GST law, which is just 3 years old, since it came into force.

Anita Rastogi, Partner GST and Indirect Taxes at PwC, says, "Multiple rates under GST brings in classification disputes and this is yet another example of that. Also considering that GST is still a new legislation, it will be prudent to take some guidance from classification related decisions under erstwhile law such as Central Sales Tax, VAT, Excise, etc."

Now, wait and see whether central government gets in some more clarity to this and how soon.