Bombay HC To Decide GST Rate On Donuts And Cakes: 5% As Restaurant Service Or 18% As Bakery Product?

Mumbai: The Bombay High Court is set to decide whether donuts and cakes should be classified under restaurant services, attracting 5% GST, or as bakery products, which could be taxed up to 18%.

A bench of Justices BP Colabawalla and Firdosh Pooniwalla was hearing a plea by Mad Over Donuts (Himesh Foods) against a show-cause notice (SCN) issued by the Directorate General of GST Intelligence (DGGI).

The Court recorded the DGGI’s assurance that no coercive recovery action would be taken against the petitioner while the case is pending. It also clarified that the petitioner could seek a stay if any recovery notice is issued.

The DGGI has demanded nearly Rs100 crore in tax dues from Mad Over Donuts and other bakery chains, arguing that donuts should be taxed as bakery products rather than under restaurant services.

The petitioner’s counsel, Abhishek Rastogi, contended that the supply of food, whether consumed on-site or taken away, qualifies as a composite supply of services under the CGST Act. He cited GST notifications that include restaurant, canteen, and takeaway services under the 5% tax bracket. He also referred to a government circular that supports classifying takeaway food under restaurant services.

Additionally, the petitioner raised procedural concerns regarding the DGGI’s issuance of a centralised SCN covering multiple GST registrations. He argued that separate notices should be issued for each jurisdiction to ensure clarity and fairness.

The DGGI’s counsel, Jitendra Mishra, clarified that no recovery notice had been issued so far, and the Court accepted this as an undertaking. The HC has directed the tax authorities to file their replies by March 17 and scheduled the matter for hearing on March 24.