Consuming popcorn at a movie theatre could soon cost you more, depending on how it is served and bundled with movie tickets. The GST Council, following a request from Uttar Pradesh, has clarified the Goods and Services Tax (GST) rates applicable to different forms of popcorn.
GST Rates on Popcorn
Loose and Salted Popcorn:
- If served loose and mixed with salt and spices, it generally attracts 5% GST, provided it is classified under 'restaurant service' and supplied independently of cinema exhibition services.
- However, if the popcorn is considered part of the cinema exhibition service, the GST rate could rise to 12% or 18%, depending on the ticket price.
Pre-Packaged and Labeled Popcorn:
- Pre-packaged and labelled popcorn falls under the 12% GST slab.
Caramel Popcorn:
- Caramel popcorn attracts a higher GST rate of 18%.
Bundled Supplies: GST Implications
Many theatres, particularly multiplexes, offer bundled deals where movie tickets are sold alongside snacks like popcorn, beverages, and other items, often at discounted prices. This raises questions about whether such transactions are composite supplies or mixed supplies, with different GST implications:
Composite Supply:
- A composite supply includes two or more naturally bundled supplies, where one is the principal supply.
- For instance, if popcorn is sold with a cinema ticket, the rate applied to the cinema ticket (12% for tickets under Rs 100 and 18% for tickets over Rs 100) could apply to the entire bundle.
Mixed Supply:
- A mixed supply involves two or more independent supplies bundled together artificially for a single price.
- In this case, the highest GST rate among the individual items is applied to the entire transaction. For example, if caramel popcorn (18% GST) is bundled with a cinema ticket priced below Rs 100 (12% GST), the entire transaction could be taxed at 18%.
Expert Opinions
Tax experts have emphasized the importance of correctly categorizing bundled supplies to ensure compliance:
- If the popcorn and ticket are naturally bundled, the principal supply - typically the movie ticket determines the GST rate.
- However, if the items are artificially bundled, such as caramel popcorn and a ticket, the higher GST rate could apply, making the purchase more expensive.
Conclusion
While the clarification aims to simplify the taxation of popcorn and snacks sold in movie theatres, it also underscores the complexities of GST regulations, particularly for bundled supplies. Moviegoers may need to be mindful of how their purchases are billed, as this could significantly impact the overall cost.
The GST Council’s clarification is expected to bring more transparency to taxation in theatres, but it also places the onus on multiplex operators to correctly categorize their supplies to avoid disputes with tax authorities.
CAclubindia
