How the GST Council's New Norms Are Shaking Up India's Snack Industry!

The GST Council’s recent move to simplify tax classifications has sent ripples through the Indian food industry, especially for popcorn. The Fitment Committee, composed of central and state revenue authorities, has clarified the tax treatment of ready-to-eat (RTE) popcorn, now falling under HS 2008 with a 12 percent GST. This move promises to change the way we see our favorite snack—popcorn.

GST Rates on Popcorn: A Game of Savory vs. Sweet
Popcorn, with its irresistible combination of sweet and savory flavors, now faces varying GST rates based on its form.
“Savory popcorn mixed with salt and spices benefits from a lower 5 percent tax as a namkeen, while pre-packed and labeled popcorn attracts 12 percent, posing slight pricing challenges. Caramelized popcorn falls under the 18 percent bracket alongside sugar confectionery, aligning with its gourmet positioning,” says Chirag Gupta, Founder & CEO of 4700BC, the popular popcorn brand. Gupta adds that these new classifications have sparked a nationwide conversation about popcorn in India. “Globally, popcorn is a mature snack (6 percent penetration in the USA), but in India, it’s still evolving. These discussions have helped shift the perception of popcorn from being just a movie snack to a packaged snack fit for anytime indulgence.”

The Price Crunch: How GST Could Hit the Industry
The GST increase to 18 percent on ready-to-cook (RTC) and ready-to-eat (RTE) products is expected to impact both manufacturers and consumers.

Vikas Suri, Director & CEO of Kitchenrama, highlights the challenges this tax hike presents: “This tax rate could lead to higher prices for these products, potentially reducing consumer demand and impacting sales volumes. Manufacturers and retailers may face decreased price competitiveness compared to fresh alternatives, negative perceptions about nutritional value, supply chain complexities, and pressure on profit margins.”
 

Will Higher Prices Kill the Market?
Higher GST rates will undoubtedly push up retail prices, and this could turn away budget-conscious consumers. With the middle class—especially in non-metro and tier-2 cities—being a major consumer base for RTC and RTE products, the higher prices could push many to stick with fresh alternatives or even return to home cooking. This price sensitivity could hurt sales, especially in non-premium segments.

However, the buzz from social media debates has given some brands a short-term boost, especially for caramel popcorn, showcasing the power of conversation-driven marketing.

Aakriti Gupta, Co-Founder of BOGATCHI Lifestylefoods, explains, “A GST increase from 5 percent to 18 percent will significantly elevate the selling price, which might deter some price-sensitive consumers, especially in non-metro or tier-2 and tier-3 cities. There could be a dip in sales as consumers adjust, with some shifting to unbranded or local alternatives that are still cheaper.”

But there’s a silver lining! Gupta adds, “The 18 percent GST rate will allow manufacturers to claim a higher input tax credit on raw materials and packaging costs, reducing the overall tax burden and potentially improving profit margins. The uniform tax rate across the value chain also simplifies accounting and compliance.”

Navigating the Challenges: What’s Next for the Industry?
While the tax increase is a challenge, the real hurdle lies in clarifying GST classifications for innovative popcorn variants, such as sweet-salty or chocolate-coated popcorn. More clarity could ease compliance and allow brands to innovate freely without worrying about fluctuating tax rates.

Suri suggests that brands tackle these challenges through product innovation, improving operational efficiency, diversifying product lines, forming partnerships, optimizing supply chains, and educating consumers with targeted marketing campaigns. By embracing these strategies, the RTC and RTE food industries can weather the storm and keep growing in the face of the new GST rates.

Meena Gupta, Founder of Gurukripa Foods, agrees: “The imposition of 18 percent GST on pre-cooked and ready-to-eat food products is a significant change that will impact both businesses and consumers. This tax hike increases the cost of these products, potentially making them less affordable to price-sensitive customers. However, brands can view this as both a challenge and an opportunity to adapt strategically.”

The Bottom Line: Can the Industry Thrive Under Higher GST?
The GST hike may cause some initial hiccups, but the long-term impact on consumer behavior is expected to be minimal. In India, differential taxation across products is common, and consumers generally adapt over time. With the right strategic moves, brands can maintain their market presence and continue to thrive in this rapidly evolving snack landscape.
Is the new GST norm a game-changer or just a temporary bump in the road? The popcorn industry is about to find out!