The Haryana Appellate Authority for Advance Rulings (AAAR) has ruled that the pizza topping is not the same as pizza under the Goods and Services Tax (GST) lens. Accordingly, that should be classified separately and imposed a higher GST rate of 18%.
This could increase the taxation complications for many pizza brands. Many tax experts opine that it could complicate the billing of pizzas sold within a hotel or restaurant.
GST rates on pizzas vary based on how they are cooked and sold. The government levies 5% GST for restaurants selling pizza to be eaten within its premise. The restaurants that buy the pizza base separately attract 12% GST, whereas a pizza delivered at home attracts 18% GST.
The appellate authority issued a ruling on 10th March 2022. It stated that pizza toppings must face a GST rate of 18% as the preparation procedure is different from the pizza. It took into consideration all ingredients that go into a topping. Finally, it opined that a pizza topping might be sold as a cheese topping. It is not precisely cheese and therefore must attract a higher tax rate.
It further stated that the pizza toppings consist of vegetable fat in significant quantities. It accounts for about 22% of the total ingredients. Therefore it fails to qualify as processed cheese or any cheese type. Pizza topping would be eligible for classification as food preparation.
Tax experts added that the levy of GST rates depends on three checks- the ingredients test, the end-use test and the standard parlance test. The tax rates usually vary based on how a product is categorised. Tax on cheese, for instance, is imposed at a lower rate if it is known as fat or processed food preparation.
They have emphasised the particular ingredients instead of the common parlance concept. So, one can treat them as cheese toppings and accordingly classify them. It reiterates that the GST classification is a factor of many principles, apart from the consumption of the product, vital constituents, common parlance, etc., and therefore a complicated process.
For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in
Annapoorna, popularly known as Anna, is an aspiring Chartered Accountant with a flair for GST. She spends most of her day Singing hymns to the tune of jee-es-tee! Well, not most of her day, just now and then.
