GST veering towards greater 'complexity', 'irrationality': Arvind Subramanian

Former chief economic adviser Arvind Subramanian has called the recent recommendations of India’s Goods and Services Tax (GST) Council on popcorn a “national tragedy” which is “violating the spirit of the Good & Simple Tax the GST was meant to be.”

Taking to microblogging platform X, Subramanian says the “folly is compounded because instead of at least moving in the direction of simplicity we are veering to greater complexity, difficulty of enforcement & just irrationality.”

The GST Council on Saturday issued a clarification on GST on popcorn. While there is no change in the rate of the popcorn, the Central Board of Indirect Taxes and Customs (CBIC) will issue a circular clarifying the current GST structure for popcorn. Ready to eat pop corn, which is not pre packaged and branded comes under 5% slab, while 12% GST is applicable on pre-packaged and branded popcorn. Caramelised pop corn comes under 18% GST as the nature of the product changes to that of a confectionary.

“There are some states where popcorn is used in salty savoury items. When added sugar comes, there is a different rate while there is low rate for salty items. GST Council had detailed deliberations on caramelised popcorn. When you talk about this, it looks silly whether we need to discuss so much on popcorn,” Finance Minister Nirmala Sitharaman in a briefing on the outcome of 55th council meeting.

States said that added sugar items like carbonated drinks and juice are taxed differently, says Sitharaman. When popcorn has added caramelised sugar, it is no longer “namkeen”, hence its tax rate is different, the Union finance minister says.

The GST Council deferred lowering the GST rate on health and life insurance premiums. The finance minister said the council has also deferred reduction in GST rate for food delivery through aggregators such as Swiggy and Zomato.

As a part of a slew GST rate tweaks announced by the GST Council, rate on sale of old and used vehicles has been increased from 12% to 18%. The move will be applicable only on businesses who claim depreciation on vehicles and not individuals.

“The GST council today decided to increase the GST rate from 12% to 18 % on sale of all old and used vehicles, including EVs other than those specified at 18% - old and used petrol vehicles of engine capacity of 1200 cc or more and of length of 4000 mm or more; diesel vehicles of engine capacity of 1500 cc or more and of length of 4000 mm and SUVs,” said the ministry of finance.

“GST is applicable only on the value that represents margin of the supplier, that is, the difference between the purchase price and selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle. Also, it is not applicable in case of unregistered persons,” the ministry clarified.