Introduction
In the recent months, the tasty caramel popcorn has been the center of the debate in the parliament and on social media platforms. Once claimed to be a simple snack, enjoyed by many people specially the moviegoers now has become a symbol of controversies around this modern tax regime. This blog travels and reveal the layering of taxation, while exploring the impact on the economy and the rationale behind this simply complex caramel taxation.
The Rise of Popcorn Taxation
The taxation on popcorn varies different in the different jurisdiction of the country, due to these diverse approaches the government eyes on the snacks reflected a three-tiered Goods and Service Tax (GST) on the popcorn which sparked a thousand of public debate and criticism1. According to this system the ready-to-eat popcorn is taxed 5%, packaged popcorn at 12%, and the most debatable caramelized popcorn at exploitative 18%2.
The tiered approach is not new in India. In USA, the taxation on popcorn also depends upon its process of preparation and its presentation. For instance, in some New York, a simple plain popcorn is usually exempted from the tax regime, but if the sugar is added and it's sugar-coated, chocolate-coated or any other coated then it becomes taxable3. This suggest that the Indian government took this tax policy from other countries. This distinction shows the delicate approach taken by some various jurisdictions in distinguishing between basic and luxurious version of the same product.
The governments define this tax mafia regime as a good motive for both the citizens and the government. The reasons for imposing these taxes on popcorn or any other snacks are multi-sided. Firstly, it is said that the government uses this taxation tools to discourage the consumption of fast foods. They suggest that by imposing these higher taxes on the caramelized popcorn, Sitaraman's policymakers aim to promote healthier and beneficial diet plans to combat issues like diabetes and obesity.4 Other factor can be revenue generation. Government is looking to earn some additional revenue. As the policymakers suggests that these revenues will allocated in the public welfare programs and schemes5. This also suggest that when government impose taxes to increase the cost of the snack foods, this might help to influence consumer behavior and encouraging people to opt for healthier alternatives6.
Consumer and the impact on Economics
The layers of different types taxes of taxes has added further layers of complexity to the popcorn which makes it further indigestive for the consumer. This has also increased the burden on the small and medium enterprises (SMEs) because they might struggle with the product classification7. The unpredictable market will surely effect the sales of these higher taxed items specially when it's the debatable caramelized popcorn with more layers which is ofcourse not more caramel but Sitaraman's three-tiered tax regime8. Once the popcorn was considered to be a simple and basic snack but now the taxation is gradually converting it into a luxurious snack which will potentially reduce the consumption of this famous snack9. This salty tax has led to a mass public criticism and even humor10. People have uploaded innumerable memes and jokes on the social media platforms reflecting the anger and frustration of the citizens11.
The industry experts and the former government officials have criticized a lot to this new tax structure for adding more layers to the caramel popcorn with the taxes without adding any significant fiscal benefits and most importantly it's a huge burden on the small vendors. Some articles also suggests that so difficult tax policy could create a bad image of the country to the potential investors specially to its small overly complicated markets12.
The debate surrounding the bigger debate around the small miniature popcorn highlights the issues within tax frameworks globally. Although the intent behind these taxes maybe to optimize the revenue and to promote the public health but he execution of this plan created a wide debate and increased layers of consumer dissatisfaction.
The popcorn tax dilemma highlights the urgent need for a proper tax regime to balance the revenue generation with ease and consumer understanding. Policymaker should refine their approach, the goal should be to create a more streamlined and straight forward policy that can achieve the objectives without burdening anyone's pockets or confusing the consumers.
To sum up the things said above, the Sitaraman's layered taxation of popcorn, may seem trivial at the first glance but also encapsulates with various challenges faced by modern tax systems. It also raises the questions about the role of taxation, the balance between revenue generation and economic growth, and most importantly the impact of this complex tax structures on businesses and consumers. The popcorn taxation debates serves as a reminder of the need of the balanced approach on taxation. Whether you are a policymaker, a business owner or a simply complicated popcorn enthusiast, understanding these complexities would be crucial in navigating the ever-evolving layering on the taxes on popcorn and other snacks.
The next time you reach your bag of popcorn, then you must know that its not just a simple tasty popcorn but actually you are dealing with a global layering of taxation which is further to be unravel.
References:
- Times of India
- Business Today
- Economic Times
- SCMP
- in
- Department of Taxation and Finance
Footnotes
3. Department of Taxation and Finance
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
