GST Council’s popcorn tax decision triggers meme fest, middle class backlash-OxBig News Network

The Goods and Services Tax (GST) Council’s decision to tax popcorn differently based on its sugar or spice content has sparked widespread criticism and a meme fest on the internet, reflecting the angst and exasperation of India’s stressed middle class.

On Saturday, GST Council announced that non-branded popcorn mixed with salt and spices would attract a 5 per cent GST. In contrast, pre-packaged and branded popcorn would be taxed at 12 per cent, while caramel popcorn, categorised as a sugar confectionery, would attract an 18 per cent GST.

Explaining the rationale behind the 18 per cent tax on caramel popcorn, Finance Minister Nirmala Sitharaman stated that any product with added sugar is taxed differently, effectively categorising caramelised popcorn as a ‘mithai’.

Criticism, memes

The announcement sparked a storm on social media, with opposition economists and some supporters of the ruling BJP government criticising the move. Many observers felt that memes mocking the Finance Minister’s reply reflected the underlying frustration and despair of India’s middle class, trapped in an unfair tax bracket.

“Memes are meant to be humorous, but they also convey the underlying pain and questioning of the current taxation system’s fairness,” they added.

India’s former chief economic adviser KV Subramanian wrote on X, “Complexity is a bureaucrat’s delight and citizens’ nightmare.”

BJP spokesperson Gopal Krishna Agarwal stated that the GST Council’s “clarification” on popcorn taxation was a response to a specific query. “It’s normal for finished products with the same basic ingredients to attract different GST rates,” he said, describing India’s GST as an “efficient and effective ecosystem for enhanced and transparent tax compliance”.

Bun and cream tax

The ‘popcorn tax’ controversy has its precursor in a debate sparked by Coimbatore hotelier D Srinivasan’s light-hearted remark on varying GST rates for food items during a meeting with Finance Minister Nirmala Sitharaman.

Srinivasan’s comment highlighted the anomalies in GST policies. He humorously pointed out, “Madam, a bun is exempt from GST, but when cream is applied to make it a cream bun, it attracts 12 per cent GST. Now, customers jokingly ask us to serve the bun and cream separately, so they can assemble the cream bun themselves.”

A video purportedly showing Srinivasan apologising to Sitharaman for expressing his concerns about GST rates also generated significant controversy.

Shrinking middle class      

India’s middle class is shrinking, and it’s a cause for concern. Recent reports indicate that affluent households in urban India have increased in 2024, but lower middle-class households have declined compared to five years ago. This stagnation of income and consumption among Indian middle-classes, coupled with a widening gap in the socio-economic class (SEC), is worrying fast-moving consumer goods companies

Recently, Nestle India chairman Suresh Narayanan highlighted the issue, stating that the “shrinking middle-class” is severely impacting sales growth in the urban segment. “There’s a top-end segment where people with money are spending lavishly, but the middle segment, which was our primary target market, seems to be shrinking,” he said.

The slowdown in consumer spending has persisted for several quarters, which is unusual. High inflation is squeezing middle-class budgets, forcing the urban population to cut spending. This trend threatens India’s economic growth, as the middle class is a key demographic segment, both economically and politically.

Frustration and anger among the middle class over their economic situation may have contributed to the ruling BJP’s lower-than-expected election performance in the 2024 Lok Sabha election.