How to tax popcorn? India's formula sparks outrage against GST system

India's move to tax popcorn differently based on its sugar or spice content has drawn criticism from the opposition and sparked social media outrage, with two former government economic advisers questioning the tax system introduced in 2017.

The Goods and Services Tax (GST) Council, chaired by the finance minister and including state representatives, announced on Saturday that non-branded popcorn mixed with salt and spices would attract a 5% GST, pre-packaged and branded popcorn 12%, and caramel popcorn, categorised as a sugar confectionery, 18%.

The differential rates come into effect immediately, ending confusion over rates as popcorn was taxed differently across states.

Explaining the rationale behind the decision to tax caramel popcorn at 18%, Finance Minister Nirmala Sitharaman said that any product with added sugar is taxed differently.

The announcement, however, sparked a social media storm on Sunday, with opposition politicians, economists and supporters of Prime Minister Narendra Modi's government criticising the move and others creating memes and poking fun at it.

"Complexity is a bureaucrat's delight and citizens' nightmare," India's previous Chief Economic Adviser K V Subramanian wrote on X. He questioned the rationale of the decision he said will contribute minimally to tax revenues, but inconvenience citizens.

His predecessor, Arvind Subramanian, said "the folly is compounded because instead of at least moving in the direction of simplicity we are veering to greater complexity, difficulty of enforcement and just irrationality".

One widely circulated post on X showed an image of a branded "salt caramel" popcorn packet and said how it would send the taxman into a tizzy calculating the tax rate on it.

Jairam Ramesh, leader and spokesman of the main opposition Congress party, said the "absurdity of three different tax slabs for popcorn under GST ... only brings to light a deeper issue that the growing complexity of a system that was supposed to be a Good and Simple Tax".

A finance ministry spokesperson and the GST Council Secretariat did not respond to requests for comment on the controversy.

Gopal Krishna Agarwal, the ruling Bharatiya Janata Party's spokesman on economic affairs, said the GST Council "clarification" on how popcorn is to be taxed was in reply to a specific query on the issue.

"It is normal when basic ingredients are same but finished products attract different GST rates," he said, adding that GST has become a very efficient and effective ecosystem for enhanced and transparent tax compliance through a corruption-free and smooth process.

The GST system has run into similar controversies for its tax classifications in the past and faced questions although not on this scale.

Previous controversies have involved taxing chapatis or unleavened Indian flatbread differently from layered flatbreads, different rates for curd and yogurt, and cream bun versus bun and cream served separately.