Top food companies, including ITC, PepsiCo India, Balaji Wafers, and Prataap Snacks, are embroiled in a dispute with the Directorate General of GST Intelligence over the application of an 18% goods and services tax (GST) on snack foods.
This disagreement stems from a recent government clarification that classifies snacks into extruded and non-extruded categories, as per sources in the food industry. Extrusion involves shaping ingredients by pushing them through a machine, a process commonly used in producing ready-to-eat snacks like Kurkure, Yellow Diamond puffs, and Bingo Mad Angles. Biscuits and potato chips, on the other hand, are considered non-extruded snacks. While companies have been paying a 12% GST on snacks overall, the GST Intelligence body is now advocating for 18% GST on extruded snacks and 12% on non-extruded ones.
According to industry sources, these companies, along with others, have received notices amounting to around Rs 1,000 crore for additional GST payments. ITC did not respond to queries, while PepsiCo and Prataap Snacks executives were unavailable for comment.
Balaji Wafers officials acknowledged the disagreement, emphasizing that the issue revolves around the classification of snack foods rather than tax evasion. “I don’t think there has been any intention by companies to evade tax. The issue here is about classification of snack foods, which the industry is not in agreement with,” said a senior executive.
This sentiment is echoed by Krishan Arora, partner and national leader of indirect tax at Grant Thornton Bharat LLP, who believes that the matter should be urgently addressed at the GST Council level to avoid prolonged litigation.
In recent months, numerous GST notices have been issued to both food and non-food firms for various discrepancies in tax payments and returns filed for the financial years 2017-18, 2018-19, and 2019-20.
