A pizza topping is not a pizza and hence should be classified differently and attract a higher GST of 18%, this is what a recent statement by the Haryana appellate authority for advance ruling (AAAR) has stated.?
This ruling could complicate taxation for several pizza brands, especially when the pizzas are sold within a hotel or restaurant, as per an ET report.
As per the report, GST rates on pizzas differ on the basis of how they are prepared and sold. Like, a pizza sold and eaten within a restaurant attracts 5% GST, the pizza base bought separately attracts 12% while a pizza delivered at home attracts 18% GST.
And this latest ruling by Haryana AAAR makes everything even more complex. It said that pizza topping should face 18% GST as its preparation method is different from that of a pizza. The authority 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.
The authority also ruled that pizza topping contains "vegetable fat" as a substantial portion, being 22% of the ingredients, and hence, it does not qualify to be categorized as "processed cheese" or a type of cheese. Pizza topping would merit classification as "food preparation", it said.
As per the?ET report, 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 categorized. Cheese, for example, is taxed at a lower rate if it is called "fat" or processed food preparation.
Moreover, a separate tax controversy is raging around GST on kiosks, restaurants and home delivery. Tax experts reportedly said that in future, restaurants, kiosks and even pizza companies that buy these toppings would have to cough up a high GST of 18%.
Classification of products has been a complex issue under GST. For instance, while lassi and milk are not taxed under GST, flavoured milk is taxed at 12% but flavoured lassi is outside the ambit of the tax regime, as per ET.
And now this latest ruling by Haryana AAAR seems to further complicate the classification under GST, whereas it remains to be seen how it impacts the pizza industry.
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