The Bombay High Court will rule on whether donuts should be taxed at 5% as restaurant food or 18% as bakery products, with Rs 100 crore in tax at stake for Mad Over Donuts.
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MUMBAI: The Bombay High Court will soon decide if donuts and cakes should be considered as restaurant services or as separate bakery products under the Goods and Services Tax (GST) rules. This case is crucial because it will determine the GST rate applicable to these items.
A bench of Justice BP Colabawalla and Justice Firdosh Pooniwalla, heard a petition filed by Mad Over Donuts (Himesh Foods). The company challenged a show-cause notice (SCN) issued by the Directorate General of GST Intelligence (DGGI).
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During the hearing, the Court noted a statement from DGGI ensuring that no immediate action would be taken to recover tax from Mad Over Donuts while the case is ongoing.
The Court also made it clear that if the tax authorities issue any recovery notice, the petitioner has the right to return to the Court for relief.
“The Petitioner is always free to approach the Court seeking a stay, if any recovery notice is issued. We will at that time consider the prayer for any interim relief,”
-the Court mentioned in its order.
The DGGI has demanded about Rs 100 crore in tax from Mad Over Donuts and similar bakery chains. They argue that 18% GST should apply to donuts and other bakery products instead of the 5% tax charged for restaurant services.
The core issue in this case is whether selling donuts—both for dining in and takeaways—should fall under restaurant services, which attract 5% GST, or be considered as bakery products, which could be taxed at 18% under GST laws.
The lawyer representing Mad Over Donuts argued that the supply of food and edible items is a composite supply of services under the CGST Act. He cited official GST notifications that confirm food served at restaurants, food joints, messes, and canteens—whether eaten there or taken away—qualifies as restaurant services.
He also referred to a government-issued circular that clearly states that takeaway services are part of restaurant services and should be taxed at 5% GST.
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Additionally, he raised concerns over how the DGGI issued a single, centralized SCN covering multiple jurisdictions. He argued that each GST registration should get a separate notice instead of a combined one, as this would ensure better clarity and fairness in taxation.
On behalf of DGGI, their lawyer assured the Court that no recovery notice had been issued against Mad Over Donuts yet.
The Court accepted this assurance, stating that the petitioner’s fears about immediate recovery actions were not necessary at this stage.
The case will now proceed to the next hearing on March 24, and the respondent tax authorities must file their response by March 17.
The legal representatives in the case are:
- Advocates Abhishek Rastogi, Aarya More, Pooja Rastogi, and Meenal Songire for the petitioner.
- Advocates Jitendra Mishra and Sangeeta Yadav for the Additional Director-DGGI and the Assistant Commissioner-DGGI.
- Advocates Satyaprakash Sharma and Suman Kumar Das for the Union of India.
CASE TITLE:
Himesh Foods v UOI.
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