Govt Says Pizza Topping Is Not Pizza, Hence 18% GST | But 5% GST For Pizza!
The Haryana Appellate Authority for Advance Ruling (AAAR) has said that a pizza topping is different from a pizza.
18% Tax On Pizza Toppings
Therefore it should be classified differently and will attract a higher 18% goods and services tax (GST).
This could complicate taxation for several pizza brands, especially when the pizzas are sold within a hotel or restaurant.
GST rates on pizzas vary depending on how they are prepared and sold.
Dining In Or Delivery? Taxes Differ
If it is sold and eaten inside a restaurant, that would attract 5% GST .
The pizza base bought separately attracts 12% while a pizza delivered at home attracts 18% GST.
So the AAAR ruled on March 10 that pizza toppings should face 18% GST since its preparation is different from that of a pizza.
Ingredients Determine Categorisation
It considered all the ingredients used in a topping and concluded that while a pizza topping is sold as a “cheese topping”, it’s not really cheese and hence should attract higher taxes.
“Vegetable fat” is 22% of pizza toppings, therefore it cannot be called ‘processed cheese’ or a type of cheese.
Hence, pizza topping should be classified as a food preparation, the authority ruled.
Classification Under GST
Tax experts said GST rates could depend on three tests – common parlance test, end use test or ingredients test -and that often tax rates could differ how a product is categorised
For example, cheese is taxed less if it is called “fat” or processed food preparation.
Harpreet Singh, partner, KPMG India said that this reaffirms the fact that classification under GST is a factor of various principles, viz. end use of product, key constituents, common parlance, etc.
In this case, the authorities have given weightage to the actual ingredients vis-a-vis common parlance, under which one would treat them as cheese toppings and classify them accordingly.
The Minutiae And Complexities
Classification of products has long been a complex issue under GST.
For example, lassi and milk are not taxed under GST but flavoured milk is taxed at 12% and flavoured lassi is outside the ambit of the tax regime.
Earlier, too, several AARs have ruled on whether GST is applicable on food items.
Here’s another headscratcher: parata and paratha are different but naan and a samosa eaten over the counter and on a chair outside the shop should be taxed differently according to the AAAR.