pazhampori: iStock
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Traditional Kerala snacks like pazhampori, ‘vada’, ‘ada’ and ‘kozhukatta’ are taxed differently because of the classification of the products under the Harmonised System of Nomenclature. Photo: iStock

After cream bun, Kerala’s banana fritters face GST heat

The slapping of 18% GST on the popular snack has rekindled the debate on inconsistent tax categorisation under the Harmonised System of Nomenclature


After cream bun and caramel popcorn, it’s now time for Kerala’s favourite snack ‘pazhampori’ to take centre-stage of the debate on inconsistent GST classifications.

Much to the disappointment of lovers of the popular tea-time banana fritters, an 18 per cent GST is set to be slapped on the snack. While one might wonder why ‘pazhampori’ will be costlier while ‘uniappam,’ a similar sweet fritter made of rice, banana and coconut can be bought at a GST rate of just 5 per cent, the answer lies in GST laws which classify products based on input materials and preparatory steps used to make the final product.

Also read: GST Council issues clarification on popcorn taxation

Differential taxation

Traditional Kerala snacks like pazhampori, ‘vada’, ‘ada’ and ‘kozhukatta’ are taxed differently because of the classification of the products under the Harmonised System of Nomenclature (HSN) based on the raw materials used and preparatory steps. The HSN is formulated by the World Customs Organisation and provides a standardised tax format for products. India’s GST Council, however, uses its discretion to set required GST rates on products.

Also read: With popcorn and cream buns lost in GST maze, experts look for logic

Therefore, while many snacks and confectionaries are classified under lower GST slabs, several of their cousins, which have slight variations in ingredients or preparations, are taxed higher.

Caramel popcorn row

Caramel popcorn, which earned criticisms and memes for Union Finance Minister Nirmala Sitharaman, after its GST was hiked to 18 per cent is a case in point. Caramel popcorn attracts a 18 per cent GST as it falls into the sugar confectionary category while its plain variant, classified as a ‘namkeen’ (savoury) is just taxed at 5 per cent.

Cream bun example

The inconsistent taxation system and unfair categorisation was flagged, albeit in a light-hearted manner, by Coimbatore-based restauranteur D Srinivasan during a meeting with Finance Minister Nirmala Sithraman last year.

Also read: GST joke on cream bun goes sour for TN BJP

“Madam, a bun doesn’t attract GST, but when cream is applied to make it a cream bun, it attracts 12 per cent GST. Customers now say, ‘You bring the bun and cream separately, and I’ll make the cream bun,’” Srinivasan had explained the conundrum in a humorous way.

While the video went viral on social media, attracting positive responses, Srinivasan had to reportedly apologise to the minister for the comment.

Multiple HSNs

Pointing to the problematic nature of classification in GST, Sherry Oommen, a jurist told The New Indian Express that the GST department is following a policy that tends to classify preparations that are not specifically covered for reduced levies to be taxed at 18 per cent.

Also read: GST Council postpones decision on slashing tax on life, health insurance

Sherry said that there are situations where a single item may get classified under more than one HSN, which in turn will determine its final tax rate.

The jurist, however, assured that it is not entirely a lost case as the issue of classification can always be taken up with the Authority for Advance Ruling (AAR).

AAR intervention

Citing an example of court intervention, Sherry said the Kerala High Court in a ruling held that ‘Malabar parota’ is just like a ‘bread’ and is subject to only 5 per cent of GST instead of the 18 per cent that was originally imposed on it and upheld by the AAR.

But not all AAR rulings are disappointing. The authority reduced the tax rates of several traditional sweet and snacks items from 18 per cent to 5 per cent after hearing a plea of Kochi-based Fresh Products. The AAR clarified that products like ‘unniappam’, ‘neyyappam’, ‘kinnathappam’, ‘kalathappam’, ‘ariyunda’, and ‘aval vilayichathu’, made with rice and jaggery, fall under the ‘sweetmeat’ category classified under HSN 2016 90.

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However, not everyone has the wherewithal to approach the AAR and the authority has delayed several applications by seeking clarifications, Kiran S Palakkal, president of The Bakers’ Association of Kerala (BAKE) told TNIE.

“Traditional snacks with a short shelf life, typically made by micro units like Kudumbashree and sold through bakeries, are particularly vulnerable. Unsold products are often discarded, resulting in denied input claims and significant financial losses,” he said.

Sherry says that an external person should be part of the AAR constitution to ensure impartiality in rulings.

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