Your Pizza just got more expensive!

If a recent order on GST of pizza toppings remains unchallenged, then your beloved pizza could get a lot more expensive in the coming days.

Appellate Authority of Advance Ruling (AAAR), Haryana has said in a recent judgement that the pizza toppings must be taxed at 18%. At the moment, a pizza, with or without toppings is charged a GST @ 5%.

Interestingly, even now a pizza is charged @ 5% for dining inside a restaurant whereas 18% for delivery. The AAAR ruled that the pizza topping should be higher as it contains various ingredients incl. veg- and non-veg additions, hence not classified as “pizza”. The ruling observed that the pizza topping contained substantial “vegetable fat” to the tune of 22% of the toppings and hence it doesn’t qualify to be considered a pizza. Pizza topping would qualify as “food preparation” it said.

“The authorities have given weightage to the actual ingredients vis-a-vis common parlance, under which one would treat them as cheese toppings and classify them accordingly,” Harpreet Singh, partner, KPMG India told The Economic Times. “This reiterates the fact that classification under GST is a factor of various principles, viz. end use of product, key constituents, common parlance, etc., and hence a complex process.”

It is learned that the two large pizza chains, Dominos and Pizza Hut may not pass on the additional burden customers immediately. Instead, they may absorb the additional GST within their margins which could stress their balance sheets. Whereas gourmet restaurants and pizza places may well pass on the GST top-up (pun intended) to customers, many of whom may not even realise though.

Smaller bakeries and mid-sized eateries will certainly face a tough calculation methodology, on the menu as well as while accounting. This, is among the few perils of the current GST regime with differential slabs for various products.