India GST: The ‘cheesy’ row over pizza toppings tax in India
It can be a challenge to get the right mix of toppings that makes a pizza delicious. An overload of toppings could make the dough soggy and the wrong mix can affect the flavor.
But in August, an Indian firm making pizza toppings mounted a different challenge in court.
It was not about the taste of the toppings. It was a dispute over the rate of Goods and Services Tax (GST) that they attracted.
Since it was introduced five years ago, the nationwide uniform levy has helped boost India’s taxes: the GST is now generating more than $17bn (£15bn) a month for the world’s fifth-largest economy.
In court, the Khera Trading Company argued that their mozzarella topping should be classified as cheese, which attracts a lower GST of 12%. After all, cheese and milk solids made up more than a third of the toppings, it said.
But a court in Haryana state disagreed. It said the cheese in the topping could not be truly classified as cheese alone.
The toppings, it said, contained vegetable oil – 22% of the ingredients, to be precise. The firm said the oil helped with the texture, added flavor to the pizza, and was cheap as well.
The court said vegetable fat was not an ingredient of cheese. That would disqualify the toppings to be counted as cheese – instead, it would be called an “edible preparation” and taxed at a higher 18%. The firm lost its case.
Such courtroom battles lead tax experts to believe that India’s ground-breaking GST – which replaced a thicket of local taxes across 29 states – is too convoluted. With five different rates – 5%, 12%, 18% and 28% and zero for unpacked food – the tax on nearly 2,000 goods and services has become too cumbersome, they say. (Petrol, diesel, electricity and real estate are exempt from GST).
“This has led to confusion on the categorization of a product or service based upon specified codes along with their rates. There has been a plethora of [court] rulings since the inception of GST,” says Anita Rastogi, partner, GST and indirect taxes, at PricewaterhouseCoopers, a consulting firm.
The tax especially seems to have tied itself in knots when it comes to India’s food industry.
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