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India's 'Pizza Topping Tax' Leads to Bizarre Legal Battle

India's 'Pizza Topping Tax' Leads to Bizarre Legal Battle

India's Goods and Services Tax (GST) -- AKA the 'pizza topping tax' -- has led to a bizarre legal battle in the populous nation.

The GST tax was introduced five years ago and, per a BBC report about the pizza topping situation, has already begun generating over $17 billion (£15 billion) a month for the Indian economy, which is the fifth largest in the world. 

In August, the Khera Trading Company, a wholesaler based in New Delhi, argued in court that their mozzarella topping should be classified as a cheese -- which has a GST of 12% -- since over 1/3 of the product is comprised of "cheese and milk solids."

A Haryana state court, however, ruled against Khera saying that the pizza topping contained 22% vegetable oil. Since vegetable fat is not an ingredient found in natural cheese, the court deemed Khera's pizza topping an "edible preparation" -- this means it has a GST of 18%, which is markedly higher than the 12% dairy rate Khera was fighting for. 

This is not the first time the tax has wreaked havoc on the food industry in recent months. The BBC's article shared additional instances in which Indian food manufacturers have found themselves in court as a direct result of GST fees.

In September of this year, a court finally ended a 20-month-long case involving paratha -- a crisp, flaky flatbread -- that is taxed at 18%. the Vadilal Group argued that this was not fair since roti -- a generic round flatbread -- is taxed at a mere 5%. 

Validal's lawyers asserted that the brand's eight frozen paratha varieties should be taxed at the same rate as roti since both foods are made primarily from wheat flour. 

The court ruled against the food brand. 

In another situation, a company that makes flavored milk has been subjected to a 12% tax while plain milk is completely tax-exempt. A court said that flavored milk does not fall under the "definition of milk," ruling in the state's favor. 

The BBC shared thoughts from economists Vijay Kelkar and Ajay Shah who said:

"...various pressure groups [in India] lobby for higher or lower taxes on one industry or another, and this distorts the resource allocation of the economy". With the government being a major buyer of goods and services, a low single-rate GST would "yield cost savings for all levels of government", they believe.

What do you think India needs to do to simplify its wildly complex GST rules?

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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