Finance Minister Nirmala Sitharaman has recently addressed the complexities surrounding the Goods and Services Tax (GST) rates on popcorn, using it as a prime example to illustrate the necessity for clear and simplified classification under the GST system. The GST council, under the new GST 2.0 structure, has addressed the long-standing confusion over GST rates on items such as popcorn, paranthas, and paneer.

Previously, popcorn was taxed at varying rates of 5%, 12%, or 18%, depending on its form of sale, packaging, and flavoring. Loose, unbranded popcorn sold without packaging or marketing attracted a 5% GST, while pre-packaged, branded, or flavored varieties like butter and cheese popcorn were taxed at 12%. Fully coated popcorn, such as caramel popcorn, was classified as sugar confectionery and subject to an 18% GST.

Sitharaman explained that this differential treatment led to confusion and even legal disputes. She cited cases where vendors selling caramelized popcorn at the same rate as salty popcorn led to court cases due to the classification complexities. The Uttar Pradesh government raised concerns about the lack of clarity, prompting the GST Council to address the issue.

Under the new GST regime, which will take effect from September 22, 2025, all salted or spiced popcorn will attract a uniform 5% GST, regardless of whether it is sold loose or in packets. This decision aims to simplify the classification and eliminate the ambiguity that previously existed. Sitharaman emphasized that the goal is to balance simplicity with fairness, avoiding one-size-fits-all approaches that may be unjust given India's economic diversity.

The Finance Minister clarified that the distinction in tax rates comes down to sugar content. Staple or lightly processed items with salt fall under the basic category and attract a lower rate, while high-sugar items, soft drinks, and beverages are subject to higher rates. All carbonated beverages, whether fruit drinks or those containing fruit juice, will now attract a 40% GST.

Sitharaman highlighted the government's focus on passing the benefits of rate cuts to consumers. She stated that industry representatives, including public sector companies, have assured that the benefits will be passed on, and the government will engage with any company that does not comply.

The popcorn clarification is part of a wider effort to smooth out ambiguities in the GST framework. Other contentious classifications, from beverages to processed foods, were addressed during consultations with states, traders, and consumer groups. The government hopes that the rollout of GST 2.0 will boost consumption, ease compliance, and provide relief to households, while ensuring that higher-rate items reflect broader policy goals on health and fiscal prudence.

In addition to popcorn, the GST Council has also simplified taxation on cream buns, which will now fall under the 5% slab, and resolved the confusion over GST rates on paneer. Finance Minister Nirmala Sitharaman has stressed that the GST reforms will be pro-farmer and pro-MSME, and the benefits will extend nationwide. The reforms are aimed at easing compliance for small businesses while ensuring farmers and consumers gain from a simpler, more efficient tax system.