In Kerala, beloved tea-time snacks like pazhampori (banana fritter), ada, and unda have found themselves tangled in the complexities of the Goods and Services Tax (GST) system. These humble delicacies, which are staples in Malayali households and bakeries, are subject to an 18% GST rate. The reason for this high tax is that many of these snacks lack specific classifications under the Harmonised System of Nomenclature (HSN), a coding system used to classify goods for tax purposes. Without an HSN code, items often default to the highest tax bracket, which, in this case, is 18%.
While snacks like peanut chikki (peanut candy) are taxed at just 5%, the absence of a proper HSN code for pazhampori and other similar snacks has meant that they fall under the highest tax rate. The lack of clarity on how to categorize these products has created confusion and concern among manufacturers, especially small and medium enterprises (SMEs).
According to Kiran S Palakkal, president of the Bakers Association of Kerala (BAKE), many Malayali snacks with a shelf life of only 6-8 hours face the same tax burden due to the vagaries of the GST system. The issue of classification has been ongoing since the implementation of GST, with manufacturers like Biju Prem Shankar, owner of Fresh Products, struggling to secure tax clarity for their products. The company's efforts have been focused on pushing for clarifications with the Authority for Advance Ruling (AAR), and some progress was made in 2019.
However, BAKE, as an association, cannot petition for tax clarification, as only GST-registered companies are allowed to do so. This limitation has left many small businesses unable to seek resolution for their concerns. For example, unniyappam, a sweet made of rice flour and jaggery, falls under the 'sweet meat' category, which attracts a 5% GST, while chips made from fruits or vegetables are taxed at 12%. In contrast, most Malayali snacks are taxed at 18%, and this discrepancy has led to frustration among producers.
Adding to the confusion is the varying classification of these products depending on where they are sold. Items sold at hotels or restaurants are taxed at 5%, but the same snacks sold in bakeries or supermarkets are subject to the higher 18% rate due to differences in how food items are categorized as either goods or services.
The situation is further complicated by the unique nature of Kerala's bakery industry, which differs from those in other regions of India. In Kerala, bakeries often sell a mix of items—Indian sweets, fried snacks, and confectionery—all under one roof. This blending of categories makes it difficult to assign the correct GST rate to each product.
The broader issue, as highlighted by Biju, is that there is no uniformity in how GST is applied across food items, even within the same category. For example, the ingredients used to make unniyappam in Kerala are similar to those used in adhirasam in Tamil Nadu, yet they fall under the same 'sweet meat' classification, which leads to different tax rates depending on the region.
The complexity of the GST system has sparked calls for reform, with many in the MSME sector advocating for simpler, more consistent tax regulations. As Biju and Kiran noted, uniform GST rates would not only simplify the lives of food manufacturers but also benefit consumers by reducing confusion and disparities in pricing.
For now, pazhampori and its fellow Malayali snacks continue to bear the weight of both their delicious flavors and the burdensome 18% GST, symbolizing the clash between traditional culinary practices and modern tax regulations.
