<p>The levy of indirect taxes on food items has always been challenging, controversial, and, at times, comical. The complexities of defining indoor and outdoor catering or wholesome meals under service tax laws, varying tax rates on tender coconut depending on packaging, and the recent GST debate on cream buns are notable examples.</p>.<p>At the 55th meeting of the GST Council held recently, ready-to-eat popcorn received special attention. If supplied unpackaged or without a label, it will attract 5% GST. However, if it is pre-packaged and labelled, the GST rate increases to 12%. When popcorn is mixed with sugar, transforming it into sugar confectionery, it becomes taxable at 18% GST. To clarify, the council defined ‘pre-packaged and labelled’ to include retail commodities up to 25 kg or 25 litres, ‘pre-packed’ as per the Legal Metrology Act, with labelling required under its provisions. </p>.<p>The GST Council also proposed reducing the GST rate on fortified rice kernel (FRK) to 5% and extending this concessional rate to food inputs supplied for preparations meant for free distribution to economically weaker sections under government programmes. Additionally, it clarified that fresh or dried pepper and raisins supplied by an agriculturist are exempt from GST. </p>.<p><strong>Safari retreats</strong></p>.<p>Historical data suggests that retrospective amendments in taxation laws are often perceived as working against taxpayers. The GST Council reinforced this perception by amending Section 17(5)(d) of the CGST Act, 2017. The amendment replaced the phrase “plant or machinery” with “plant and machinery” in the blocked credit provisions, effectively nullifying the Supreme Court’s judgement in the Safari Retreats case. In this case, the court had held that input tax credit (ITC) can be claimed on plant and machinery that satisfied the test of functionality. With this amendment, ITC disallowances under Section 17(5)(d) continue.</p>.<p>Apart from the above major decision, the GST Council also made several routine decisions: 18 changes in tax rates and exemptions, five proposals for trade facilitation, two compliance streamlining measures, seven amendments to laws and procedures, and four other miscellaneous amendments. Discussions on GST for insurance premiums were deferred, pending inputs from the insurance regulator, IRDAI. The council proposed increasing the GST rate on margins earned from the sale of used vehicles, including EVs, from 12% to 18%. </p>.<p>The council clarified that transactions in vouchers are neither a supply of goods nor services. When vouchers are distributed on a principal-to-principal basis, they are exempt from GST. However, distribution on a principal-to-agent basis is taxable on the commission or fee charged by the agent. Additional services such as advertisement, co-branding, marketing and promotion, customisation and technology support, customer support, etc., related to vouchers would be leviable to GST on the amount paid for these services. Unredeemed vouchers would not be considered as supply under GST, and no GST is payable on income booked in the accounts in respect of breakage. A clarification was also provided that no GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.</p>.<p><strong>GST tribunals</strong></p>.<p>The establishment of GST tribunals across the country remains stalled. The council took note of the proposed procedural rules for GSTAT’s internal functioning, which will be notified only after examination by the Law Committee, delaying the Tribunal’s operationalisation. Consequently, justice remains delayed for taxpayers facing aggressive assessment orders.</p>.<p>The Council extended the timeframe for the Group of Ministers on GST compensation restructuring to June 30, 2025. At Andhra Pradesh’s request, a new Group of Ministers will examine the legal and structural issues to recommend a uniform policy on levying GST in the case of a natural disaster or calamity. The issue of whether charges collected by municipalities for granting FSI, including additional FSI, are chargeable to GST on a reverse charge basis was deferred on the behest of the central government on the ground that this amount relates to municipalities or local authorities. </p>.<p>What next for GST tax-payers? Budget 2025 in February 2025. </p>.<p><em>(The writer is a Bengaluru-based tax expert)</em></p>
<p>The levy of indirect taxes on food items has always been challenging, controversial, and, at times, comical. The complexities of defining indoor and outdoor catering or wholesome meals under service tax laws, varying tax rates on tender coconut depending on packaging, and the recent GST debate on cream buns are notable examples.</p>.<p>At the 55th meeting of the GST Council held recently, ready-to-eat popcorn received special attention. If supplied unpackaged or without a label, it will attract 5% GST. However, if it is pre-packaged and labelled, the GST rate increases to 12%. When popcorn is mixed with sugar, transforming it into sugar confectionery, it becomes taxable at 18% GST. To clarify, the council defined ‘pre-packaged and labelled’ to include retail commodities up to 25 kg or 25 litres, ‘pre-packed’ as per the Legal Metrology Act, with labelling required under its provisions. </p>.<p>The GST Council also proposed reducing the GST rate on fortified rice kernel (FRK) to 5% and extending this concessional rate to food inputs supplied for preparations meant for free distribution to economically weaker sections under government programmes. Additionally, it clarified that fresh or dried pepper and raisins supplied by an agriculturist are exempt from GST. </p>.<p><strong>Safari retreats</strong></p>.<p>Historical data suggests that retrospective amendments in taxation laws are often perceived as working against taxpayers. The GST Council reinforced this perception by amending Section 17(5)(d) of the CGST Act, 2017. The amendment replaced the phrase “plant or machinery” with “plant and machinery” in the blocked credit provisions, effectively nullifying the Supreme Court’s judgement in the Safari Retreats case. In this case, the court had held that input tax credit (ITC) can be claimed on plant and machinery that satisfied the test of functionality. With this amendment, ITC disallowances under Section 17(5)(d) continue.</p>.<p>Apart from the above major decision, the GST Council also made several routine decisions: 18 changes in tax rates and exemptions, five proposals for trade facilitation, two compliance streamlining measures, seven amendments to laws and procedures, and four other miscellaneous amendments. Discussions on GST for insurance premiums were deferred, pending inputs from the insurance regulator, IRDAI. The council proposed increasing the GST rate on margins earned from the sale of used vehicles, including EVs, from 12% to 18%. </p>.<p>The council clarified that transactions in vouchers are neither a supply of goods nor services. When vouchers are distributed on a principal-to-principal basis, they are exempt from GST. However, distribution on a principal-to-agent basis is taxable on the commission or fee charged by the agent. Additional services such as advertisement, co-branding, marketing and promotion, customisation and technology support, customer support, etc., related to vouchers would be leviable to GST on the amount paid for these services. Unredeemed vouchers would not be considered as supply under GST, and no GST is payable on income booked in the accounts in respect of breakage. A clarification was also provided that no GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.</p>.<p><strong>GST tribunals</strong></p>.<p>The establishment of GST tribunals across the country remains stalled. The council took note of the proposed procedural rules for GSTAT’s internal functioning, which will be notified only after examination by the Law Committee, delaying the Tribunal’s operationalisation. Consequently, justice remains delayed for taxpayers facing aggressive assessment orders.</p>.<p>The Council extended the timeframe for the Group of Ministers on GST compensation restructuring to June 30, 2025. At Andhra Pradesh’s request, a new Group of Ministers will examine the legal and structural issues to recommend a uniform policy on levying GST in the case of a natural disaster or calamity. The issue of whether charges collected by municipalities for granting FSI, including additional FSI, are chargeable to GST on a reverse charge basis was deferred on the behest of the central government on the ground that this amount relates to municipalities or local authorities. </p>.<p>What next for GST tax-payers? Budget 2025 in February 2025. </p>.<p><em>(The writer is a Bengaluru-based tax expert)</em></p>
