The GST (goods and services tax) council's announcement on December 21 regarding different tax rates on popcorn became a subject of a meme fest over the weekend but it has also added to the confusion of exhibitors.
While top multiplex chains like PVR Inox and Miraj Cinemas have clarified no change in tax slabs for any popcorn, including caramel, sold in cinemas, single screen exhibitor Vishek Chauhan told Moneycontrol that caramel popcorn sold in theatres will attract 18 percent GST as against the earlier 5 percent GST.
Need for clarity
"It is clear that tax on salted and butter popcorn when sold loose is 5 percent but the same when packaged goes under 12 percent. But when the popcorn is mixed with sugar then the GST is 18 percent. But the confusion is because it hasn't been spelled out that when sold loose, caramel popcorn will still be at 5 percent GST and I don't think that's the scenario. There needs to be clarity," Chauhan said.
"This (the new GST rates) does not change any tax structure for popcorn sold in cinemas as we sell loose popcorn, which was taxed 5 percent before and now as well. The new GST rates are for the packed / tin sold in grocery stores or modern retail," said Miraj Cinemas' managing director, Amit Sharma.
PVR Inox's chief financial officer Gaurav Sharma also said that the GST on popcorn sold in cinemas will continue to attract 5 percent GST. However, he added that they are reading the fine print for caramel popcorn sold in theatres.
In their latest statement, the multiplex chain clarified, "We have read the fine print and it is clear that the recent GST clarification has no impact on sale of popcorn in cinemas, which are sold at 5 percent GST only."
"I think there will be a hike in terms of even selling popcorn loosely because it differentiates the category from being salty to sweet. It ceases to be popcorn when caramelised, it is then a confectionary (sweet), which will attract higher GST and will be applicable to popcorn in cinemas also," Chauhan reiterated.
Popcorn to get costly
Chauhan estimates caramel popcorn to get expensive by around Rs 10-15 at cinemas.
"Loose sweets are taxed at 5 percent but sugar boiled confectionery is taxed at 12 percent and sugar confectionary at 18 percent. But there is no mention of packaged or not packaged. I think caramel popcorn sold at cinemas will be taxed at 18 percent or probably 12 percent but definitely not 5 percent," the single screen exhibitor added.
The GST Council, after its meeting on December 21, issued a clarification on the GST buzz on popcorn.
'Ready-to-eat popcorn', which is mixed with salt and spices and has the essential character of 'Namkeen', currently attracts a 5 percent GST if it is not pre-packaged and labelled.
Pre-packed and labelled ready-to-eat snacks will attract a 12 percent tax, while an 18 percent GST will be levied if the popcorn is caramelized.
When popcorn is mixed with sugar (caramel popcorn), its essential character changes to that of a sugar confectionery, and it would therefore be classified under HS 1704 90 90, and will attract an 18 percent GST, as per the clarification by the GST council.
In this scenario, caramel popcorn sold in cinemas will attract a higher GST of 18 percent from the previous 5 percent.
"Caramel popcorn will get slightly expensive. Its prices are likely to see a 12 percent inflation with an 18 percent GST slab," said Karan Taurani, senior vice-president, Elara Capital.
Navigating impact
"The (caramel popcorn) contribution of 1-2 percent to PVR Inox sales is likely to impact 0.2-0.3 percent of the total sales of the company. The price hike is likely to be passed on to consumers, which will eventually mean no impact for PVR Inox," he added.
Food and Beverages (F&B)' segment contributes 34 percent of total PVR Inox revenue, Taurani noted. "Within F&B, popcorn contributes 40 percent of F&B sales, while caramelised popcorn consumption forms 10 percent of total popcorn sales."
In FY24, PVR Inox's food and beverage (F&B) business grew faster than its movie ticket sales. Revenue from F&B sales grew 21 percent in FY24, higher than the sales from movie tickets, which registered a 19 percent growth in the last financial year. F&B revenue increased to Rs 1,958.4 crore in FY24 from Rs 1,618 crore a year ago while movie ticket revenue stood at Rs 3,279.9 crore versus Rs 2,751.4 crore in FY23.
The different tax slabs for popcorn led to a meme fest with people posting on social media pictures of brands selling salt and caramel popcorn, asking how much GST would it attract.
A similar confusion can be expected in cinemas if caramel popcorn will attract 18 percent GST as many theatres offer a combination of salt/cheese and caramel popcorn.
Former Chief Economic Advisor (CEA) Krishnamurthy Subramanian has raised concerns over the rationale behind the GST Council's decision to impose different GST rates on different types of popcorn and the inconvenience it will be for the people.
According to him, popcorn taxed at 18 percent will only contribute 0.013 percent to the total GST collection for 2025.
Former Infosys CFO Mohandas Pai also called the varying GST rates for popcorn "silly and complex".
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