Dispute Arises Between Food Firms and GST Authority Over 18% Tax Rate on Snacks

Leading food companies, including ITC, PepsiCo India, Balaji Wafers, and Prataap Snacks, find themselves at odds with the Directorate General of GST Intelligence over the imposition of an 18% goods and services tax (GST) on snack foods. This dispute arises from a recent clarification by the government that categorizes snacks as either extruded or non-extruded, according to sources within the food industry.

Extrusion, a common food processing technique, involves pushing ingredients through a machine to achieve a desired shape. Ready-to-eat snacks such as Kurkure by PepsiCo, Yellow Diamond puffs and rings by Prataap Snacks, and Bingo Mad Angles by ITC fall under the category of extruded snacks. On the other hand, non-extruded snacks encompass products like biscuits and potato chips. While extruded snacks contribute 25–30% to the total salty snack market, non-extruded snacks make up the remainder.

Despite previously paying a 12% GST on snacks overall, the GST Intelligence body now insists on an 18% GST for extruded snacks and 12% for non-extruded snacks.

According to sources in the food industry, affected companies, including those mentioned, have received notices amounting to approximately Rs. 1,000 crore for additional GST payments.

Balaji Wafers officials acknowledged the dispute, highlighting that it revolves around the classification of snack foods rather than tax evasion. Krishan Arora, partner and national leader of indirect tax at Grant Thornton Bharat LLP, echoed this sentiment, stressing the need for clarity at the GST Council level to avoid prolonged legal battles.

The disagreement underscores broader issues in GST compliance, with both food and non-food firms facing notices for discrepancies in tax payments and returns filed for fiscal years 2017–18, 2018–19, and 2019–20.