The meeting of the Goods and Services Tax (GST) Council seems to have ended without any important decision. The council deferred decisions on health insurance, term insurance, rate rationalization, delivery charges on expedited commerce, calamity cess and floor space index.
Among the decisions made by the council, the tax on popcorn emerged as a symptom of its thought process. On the one hand, the government is advocating rationalization of the tax slab, on the other hand, it has proposed three different rates based on the taste and packaging of popcorn.
Believing that caramel popcorn will be available in high-end malls or theaters, the council has levied 18 percent GST on it. Pre-packaged and labeled salt and spiced, ready-to-eat popcorn will attract 12 percent GST, while the same product, unlabeled and packaged, will attract five percent tax.
These tax slabs were fixed based on an assumption that caramel popcorn is mostly consumed by the rich class, who can afford to pay little additional tax. However, this assumption is incorrect because it is based on the belief that less affluent people do not consume caramel popcorn.
No decision has been taken to exempt health insurance premiums from GST. However, it seems that this discount can only be given to health insurance policies with an insurance cover of Rs 5 lakh, while it seems that taxes are usually levied on policies above Rs 5 lakh.
This approach goes against the state objective of GST rollout, which is a simplified tax regime. However, a four-slab GST with numerous exemptions is perhaps simpler. The group of ministers has been asked to recommend rationalization of rates on 148 items, but the report has not been finalised. It is high time that the GST rates are categorized into only two slabs – essential and non-essential – which will simplify the tax system and increase tax compliance.