Policy Watch: Popcorn outrage hides $51.9bn GST tax disputes
We wish you a very Happy New Year.
Dear all,
From us to you: we wish you a very happy and prosperous New Year. Thank you for choosing to be a part of the Bridge India community.
Our top Policy Watch newsletters of last year were a really broad mix, although immigration featured strongly:
One Nation, One Vote: The focus on potential cost savings are a red herring.
Indian emigration to the UK - Taking back control? A post-Brexit policy has been responsible for surging Indian immigration.
Gujarati immigrants to the UK facing deportation: The issues around Care and Social Work visas.
British immigration policy flip-flops again: The Migration Advisory Committee report came out last week.
BBC India changes forever: The BBC recommenced its operations in India from April.
IMF: "Easily" the world's fastest growing economy: We said things were looking up, but growth has slowed dramatically since then.
The loophole for the well-connected: Tax loopholes for the super rich.
We’ll soon share more information about our flagship Ideas for India conference. Members attend for free, so make sure you become a Member today here.
The Goods and Services Tax (GST) was touted as PM Modi as the “Good and Simple Tax” when it was introduced. No doubt, it’s been a gamechanger in how indirect taxes are collected in India and while corporation and income tax collections are sluggish, GST collections are booming. But there has been constant tinkering of an already complicated system, culminating this week in Finance Minister Nirmala Sitharaman elaborately having to describe different types of popcorn you can buy at the cinema. Scroll down for more on this.
Neo-banking for NRIs: About Vance
Vance is FCA-regulated and specifically designed for NRIs, making it the #1 choice to send money to India. With Google-matching exchange rates and secure, reliable transfers, over 150,000 NRIs trust Vance for peace of mind with every transaction. Download the Vance app now to claim £50 and enjoy a free transfer!
New Corporate Membership options introduced
Like what you see here? Check our our Membership options.
Individual Membership is £150 annually, concessions £100. Corporate Membership options are for businesses, non-profits, advocacy organisations and others, looking for bespoke services that meet their strategic goals. We can provide in-depth alignment with a series of networking opportunities, policy initiatives or curated programmes. Prices start at £750 annually.
Policy Watch: India's popcorn outrage
The 55th GST Council Meeting took place on 21 December, which introduced new changes to the GST regime.
Saturday that non-branded plain or savoury popcorn would attract a 5% GST, pre-packaged and branded popcorn 12%, and caramel popcorn, categorised as a “sugar confectionery”, 18%. It provided the legal framework for the Invoice Management System (IMS) by amending the required sections and rules of the act.
The complexity
Amongst the changes Saturday was popcorn being taxed three different ways. Non-branded popcorn mixed with salt and spices would attract a 5% GST, pre-packaged and branded popcorn 12%, and caramelised (sweet) popcorn 18%.
A sidebar - if you go to Cineworld in London, you can ask the popcorn guy to give you a mix of sweet and salted (for the same price). That tax nightmare would give Indian popcorn-wallahs sleepness nights.
As with any country’s tax regime, India has some other quirks too. It probably has more than its fair share. A plain bun is untaxed. Add butter to it, and it’s taxed at 12%. Coconut hair oil is taxed at 5%, but other hair oil at 18%. Plain bread at a bakery is 0%, but toast is 5%. Pastries (i.e. desserts) are 18% but mithai (still desserts…) are 5%. Sugar confectionary (like the caramelised popcorn) is 18% but sugar boiled confectionary (like toffee) is 12%. Huh?
The sale of all used and old vehicles, including electric vehicles, increased from 12% to 18% in this GST Council meeting too, with the difference applying to the difference between the purchase and selling price only. It will also not apply to unregistered persons (i.e. the common man) selling their vehicle. New EVs carry a 5% GST. There are fears this will negatively impact EV uptake, a key government priority.
Luxury or sin items like cars, air conditioners, access to race clubs, online money gamling are taxed at 28%. But other luxury items like diamonds, gold and silver are taxed at 0.25% and 3% thanks to a powerful lobby.
India has seven GST rates: 0%, 0.25%, 3%, 5%, 12%, 18%, 28%. This is amongst the most complex in the world and highest of these, is among the highest globally.
The eye-popping fraud
The complexity might be funny and annoying in equal measure, but there is a darker side to complexity.
According to Central Board of Indirect Taxes and Customs member Shashank Priya said, in an all-India drive against fake registrations for GST during Aug-Oct this year, 27% of GSTINs (the ID number) were fake. This was a similar number to an earlier similar drive by the CBIC. They detected tax evasion of of Rs 10,179 crore (£1bn) and blocked Income Tax Credit of Rs 2,994 crore (£300m). So far, recovery has been at a paltry Rs 28 crore (£2.8m).
Last year’s drive uncovered suspected tax evasion of Rs 24,010 crore (£2.4bn). But five government agencies can raise tax demands, not just one. GST is administered by the central and state governments both. This regulatory complexity contributes to a “you’re guilty until you prove yourself innocent” approach.
The complexity
Over the last three years, the tax disputes stands at $51.9bn according to Bloomberg (£40bn), with a focus on online gaming, financial services and works contracts. See the graph above
In August, Infosys was served with a $3.9 billion tax demand from both centre and state authorities for the supply of services from its overseas branches. The government eventually withdrew its notice.
Around the same time, Mahindra & Mahindra, parent of a large auto-to-tech business group, was asked to pay tax on use of its brand by group companies, even though they pay no fee.
The government needs to urgently change its approach through a combination of a more conciliatory and consultative approach, introducing a graded compliance model to distinguish between small and large breaches, reducing the duplicate filings companies need to do and resolving disputes faster.
But this involves a hard trade-off that the government won’t like - less revenue today in exchange for higher, more stable revenue tomorrow.
Sources: Bloomberg, Ernst & Young, The News Minute, Cleartax.in, Reuters, Business Standard.
Upcoming events
Keep Calm and Curry On: A Cross-Cultural Comedy Affair (Sat 25 Jan | Pinner | Find out more)
In collaboration with The Heath Robinson Museum, we present a hilarious evening with British Gujarati content creator and comedian Parle Patel and friends Ankit Patel and content creator Jay Joshi, and introduced by artist Ketna Patel. With his signature sharp humour, Parle dives into the hilarities of navigating life as a British-Indian ‘coconut,’ balancing pub curries with Sunday roasts, dodging nosy aunties, and perfecting the art of masala beans on toast.
When: Saturday 25 January | 5:30 – 8:30pm
Where: Heath Robinson Museum, Pinner Memorial Park, 50 West End Lane, Pinner HA5 1AE
Tickets: Free for Corporate Members, otherwise £25 (includes one complimentary drink) | Book here
Silk Saris, Street Food and the British Dream: A British Indian’s Journey (Sat 1 Feb | Pinner | Find out more)
In collaboration with The Heath Robinson Museum, we present a conversation between publisher and business leader Prabhu Guptara and business leader, philanthropist and SHEIN ESG Board Member Ram Gidoomal CBE. Set against the vibrant backdrop of Ketna Patel's pop art exhibition, Remixology, this event weaves together the threads of migration, identity, and reinvention. Ram talks about his privileged childhood in Mombasa, going through the upheaval of Partition and forced migration, to rebuilding a life of purpose and generosity in the UK, Ram’s story is one of reinvention, grit, and grace.
When: Saturday 1 February | 3 – 5pm
Where: Heath Robinson Museum, Pinner Memorial Park, 50 West End Lane, Pinner HA5 1AE
Tickets: Free for Corporate Members, otherwise £12 | Book here
Network Tree x Bridge India Business Networking (12 Feb | Book here)
Business networking organisation Network Tree and Bridge India get together for an evening of networking, at the LaLiT London. You’ll meet around 50 senior professionals from finance, business, tech, insurance and international trade.
When: 6pm onwards, Wed 12 February
Where: Baluchi restaurant, The LaLiT London, 181 Tooley Street, London SE1 2JR
Booking: Free for Corporate Members, otherwise £50 | Canapes and welcome drink included | Book here
Request to join delegation to Indiaspora’s Forum For Good (23-26 Feb, UAE | More details)
Bridge India is delighted to be taking a delegation to this important event, created with a simple mission: To unite as a force for good and drive new models for the world. The Indiaspora Forum for Good is designed to develop solutions for humanity’s most pressing issues and create a legacy for future generations.
Confirmed speakers include: Sheikh Nahayan Mabarak Al Nahyan (Minister of Tolerance and Coexistence, Government of UAE), Vivek Oberoi (Actor and Investor), Niren Chaudhury (Former CEO, Panera Brands), Pratik Dattani (Founder, Bridge India), Vimal Kapur (Chairman and CEO, Honeywell), Bhavish Aggarwal (CEO, OLA), Kailash Satyarthi (Exec Director, Kailash Satyarthi Children's Foundation), Vijay Amritraj (Hall of Fame tennis player).
In Conversation with Kancha Ilaiah Shepherd (17 March, Piccadilly | Book here)
We are delighted to be hosting with the leading Indian political theorist, writer, and Dalit rights activist. His main domain of study and activism is the annihilation of caste. He is the former director of the Centre for the Study of Social Exclusion and Inclusive Policy, Maulana Azad National Urdu University, and former head of the Department of Political Science at Osmania University, Hyderabad. His books, Why I Am Not a Hindu, God as a Political Philosopher, Post-Hindu India and Buffalo Nationalism, have played a critical role in shaping shudra, OBC and dalit discourse in India and abroad.
When: 5:30 pm arrivals, 6 pm start, 7:15 pm networking, Monday 17 March 2025
Where: 5th floor, Waterstones Piccadilly, 203-206 Piccadilly, St. James’s, London W1J 9HD
Tickets: Free for Corporate Members, £10 for Members, £15 for Non-Members | Book here.
--
The Bridge India Team
contact@bridgeindia.org.uk | www.bridgeindia.org.uk
Follow us on LinkedIn | Instagram| Twitter | Facebook | Bluesky | YouTube
About Bridge India: Bridge India is a progressive non-profit think tank dedicated to discourse on public policy. Bridge India is a company limited by guarantee Companies House number 15283062.