GST Update on Ready to eat popcorn to attract 18% GST- AAR Gujarat 77/2020-21

The classification dispute in GST has not even spared the food items as after the dispute of “Paratha being a roti or not”, now comes the dispute as to “Popcorn is a maize or not”. Our GST update on why paratha is not a roti-AAR Karnataka can be referred as GST Update No. 69/2020-21 on our website. As we all know that there is lower GST rate of 5% on cereals, the dispute cropped as to whether popcorn is to be considered as maize attracting 5% GST rate or to be considered as Ready to Eat food attracting 18% GST? The classification of popcorn and the applicable GST rate was considered in the recent Advance Ruling pronounced in the case of M/s Jay Jalaram Enterprises.
The applicant, claimed that the popcorn manufactured by it shouldattract 5 per cent GST under serial no. 50 of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 covering “Maize (Corn) put up in unit container and bearing a registered brand name”. It was contended that popcorn is maize and so the GST rate of 5% should be applicable on it. The applicant also placed reliance on a judgment delivered by Apex Court in the case of M/s AlladiVenkateshwaralu and Others v. Govt. of A.P wherein it was held that the term parched rice and puffed rice are Rice and sothe same logic should be applied to its product. It was contended that adoption of heating process on maize and adding oil and salt, the maize remains a grain and is covered under HSN 1005. Alternatively, it pleaded that their product merits classification under serial no. 57 of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 covering “cereal grains otherwise worked” attracting GST at the rate of 5%.
However, the AAR concluded that the product of the applicant is ready to eat prepared food and aptly fits into the description “Prepared foods obtained by roasting of cereal” falling under chapter 1904 10 attracting GST rate of 18%. Reliance was also placed on the Apex Court decision in the case of M/s Frito Lay India [2009 (242) E.L.T. 3 (SC)] pertaining to popcorns. The AAR held that the product falls under serial no. 15 of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 with the description that all goods, i.e. corn flakes, bulgar wheat, prepared foods obtained from cereal flakes”.

The AAR held that the process of manufacturing ready-to-eat popcorns involved heating of corn kernels, the addition of oil and seasonings. Therefore, it was concluded that the product does not remain a grain after the heating process and converts into popcorn.

In our opinion, the above ruling as regards cooked and ready to eat popcorns is correct as adoption of heat process on the maize leads to manufacture of popcorn which cannot be considered as a cereal. However, the ruling should not be applicable for “Act-II Popcorns” which are required to be heated by the customer before consumption. In our opinion, such product would continue to be considered as maize as mere addition of oil and preservatives would not change its character of cereal. Therefore, in nutshell, in order to avail benefit of 5% GST rate, the substantial characteristic of cereal/grain should not be changed as in case of ready to eat popcorns.
This is solely for educational purpose.
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GST Update on Ready to eat popcorn to attract 18% GST- AAR Gujarat 77/2020-21

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