The tax rate on caramelized popcorn, which became the topic of discussion on social media on Saturday, has been increased from 5% to 18%. Shocked by the outrage on social media over the increased rate of caramelised popcorn, the Finance Minister pointed out that ready-to-eat popcorn, to which salt and spices are added, is classified as salted, and hence, if it is pre-packed and supplied in any form other than labeled, it will attract 5% GST and if it is supplied in pre-packed and labeled form, it will attract 12% GST. However, when sugar is added to popcorn, thereby changing its character to sugar confectionery, it will attract 18% GST. Sitharaman said clarification was needed, otherwise the matter would give rise to unnecessary legal disputes.
Among other changes in rates, the Council has increased the concessional 5% GST rate on food inputs supplied for food preparations for free distribution to economically weaker sections under a government program subject to existing conditions. It has exempted gene therapy from GST, reduced the rate on fortified rice kernels (FRK) to 5%, and reduced the rate of compensation cess on supplies to merchant exporters to 0.1%, equal to the GST rate on such supplies. The Council also clarified that no GST is payable on 'penal charges' levied and collected from borrowers by banks and NBFCs for non-compliance of loan terms.
The GST Council also made an important clarification regarding taxation of vouchers. It clarified that transactions in vouchers will neither be treated as supply of goods nor as supply of services and distribution of vouchers on principal-to-principal basis will not be subject to GST. However, where vouchers are distributed on principal-to-agent basis, the commission/fees or any other amount charged by the agent for such distribution is taxable under GST.
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