Millet Biscuits Subject to GST, Millet Powder Not; GoM Re-examines Food Items classification

The Group of Ministers (GoM) has started re-examining the classification of food items for the purpose of taxation as the Goods and Services Tax (GST) rate has been updated to overcome persistent uncertainties that have caused legal disputes and loss of government revenue.

For example, millet biscuits are taxed under GST, while millet powder is exempt from the payment of GST, as per the sources.

The Group of Ministers (GoM) is also talking to states like Maharashtra, Karnataka, and Kerala, as they have done their own research and are dealing with related court cases.

He said that the goal is to make the definitions clearer and fix any inconsistencies in the GST rate system. He said, “The GoM on rate rationalisation is looking at some major reforms, at least on the classification front. The GoM is definitely looking at misclassification issues in food and other items. At least to start with, the classification of food items can be sorted. Some other items are also being examined.”

He said the work of classification is a part of larger plans to enhance the system. Food items are being given priority because they often cause disagreements over taxes, especially when deciding if they are packed or sold loose or if they are branded or unbranded.

The sources explained, “For instance, millet powder is exempt under GST, but millet biscuit is not. This creates confusion. Misclassification happens, and it leads to a lot of litigation,” Further says, “Some food products are taxed at 18 percent, some at 12 percent. Not even for a second can somebody say that the classification structure is totally simple?”

States Being Consulted

To make sure the classifications match real-world situations, the Group of Ministers (GoM) is talking to states like Maharashtra, Karnataka, and Kerala. These states have done their own research and are handling related court cases. “The GoM is asking these states for their views, especially since they’ve dealt with actual disputes,” he said.

The goal is to make things easier both for businesses following the rules and for tax officials who enforce them. These suggestions are expected to be shared with the GST Council in the coming months.

Popcorn to Donuts

One major issue is how different types of popcorn are taxed. For example, unpackaged and unlabelled popcorn with salt and spices is taxed at 5% as ‘namkeen.’ But if the same popcorn is packed and labelled, it’s taxed at 12%. And caramel popcorn with sugar is taxed at 18% because it’s treated as a sweet.

Another ongoing case involves the donuts chain Mad Over Donuts. The company says it should be taxed like a restaurant at 5%, but tax authorities disagree. Since the chain doesn’t offer full restaurant services, they say it should pay 18% GST. The case is now in the Karnataka High Court.

Legal Rulings as Reference

The GoM is also looking at past rulings by AARs (Authority for Advance Rulings), which are official bodies that give legal decisions on GST matters. These rulings haven’t always been consistent, especially for similar products. The GoM plans to collect these rulings and combine them with feedback from states and businesses to come up with final suggestions.

Each state has its own AAR, and their decisions are binding for the business that asks and the local tax officer, unless a higher body or court changes the ruling.