Consuming loose and salted popcorn in a movie theatre can attract GST up to 18 per cent. GST rate on popcorn bought together with movie tickets will be 12 per cent or 18 per cent based on the ticket price if the bundled supply satisfies the test of composite supply.

Based on request from Uttar Pradesh, GST Council clarified that ready-to-eat popcorn, mixed with salt and spices, will attract 5 per cent GST. If it is sold pre packaged and labelled, the GST rate would be 12 per cent and the GST rate for caramel popcorn falls under 18 per cent.

Later, government sources said that generally, popcorn is served to customers in theatres in loose form and hence will continue to attract rate of 5 per cent as applicable to ‘restaurant service’ as long as “supplied independent of the cinema exhibition service.” Application of the last section of the sentence can raise the GST to 12 or 18 per cent for loose and salted popcorn.

Many theatres, especially multiplexes, provide online ticket booking to their patrons. Online ticket purchase accompanies an option buying popcorn, snacks and beverages . Normally the offer comes with discount, making the whole deal attractive. Such a supply, from taxation point of view, could be ‘composite supply’ or even ‘mixed supply’. It may be noted that cinema ticket below ₹100 attracts GST at 12 per cent and above ₹100, attracts 18 per cent GST.

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“A composite supply is a combination of two or more supplies which are naturally bundled and are supplied together in ordinary course of business. Also, in such cases, one of the supplies is the principal supply that gives the transaction its essential character and the rate on such principal supply is applied to the total value of the supply,” explained Harpreet Singh, Partner (Indirect Tax) at Deloitte.

If food and beverages are clubbed together with cinema ticket, then the entire bundled supply would be treated as cinema exhibition services (subject to the test of composite supply). “GST rate on popcorn bought together with ticket will be 12 per cent or 18 per cent based on the ticket price if the bundled supply satisfies the test of composite supply,” Rajat Mohan, Senior Partner, AMRG & Associates said.

There could be the question of mixed supply also. Under this, according to Singh, two or more independent supplies are bundled, not naturally, together for a single price. In this case, the highest rate applicable on the individual supply within the mixed supply, is applied to the entire value.

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“Where caramelized popcorn liable at the GST rate of 18 per cent is sold with a movie ticket priced below ₹100, which is liable to tax @ 12 per cent, the tax authorities may take a view that the same is not a composite supply, where movie ticket is the principal supply and accept the lower GST rate of 12 per cent on the entire transaction. Instead, the allegation could be that the same is a mixed supply liable to tax at the highest rate of 18 per cent on the entire value” adds Singh.