New Delhi, June 30 -- A pinch of turmeric in milk or a sprinkle of caramel on popcorn may seem like simple indulgences. But under India's Goods and Services Tax (GST) system, these "value additions" often invite a much higher tax rate. As food entrepreneurs innovate and package convenience into every bite, tax authorities seem equally inventive-serving up increasingly steep GST slabs in return.

One of the core objectives behind replacing India's complex Excise and VAT regime with GST from 1 July 2017 was to eliminate the cascading effect of taxes on prices. This was largely achieved through the unification of various indirect taxes and the input tax credit (ITC) system, which allows businesses to claim credit on taxes paid for inputs-bar...