The Bombay High Court will decide whether donuts and cakes should be subject to a 5% or 18% tax under the Goods and Services Tax (GST). The case comes after a plea by Himesh Foods Pvt Ltd, the parent company of Mad Over Donuts (MOD), challenging a show-cause notice issued by the Directorate General of GST Intelligence (DGGI).
On Monday, a bench of Justices BP Colabawalla and Firdosh Pooniwalla had heard the plea, which argued that donuts should be taxed at the lower 5% rate, applicable to food served at restaurants.
The DGGI, however, has claimed that donuts are a bakery product and should be taxed at 18%, which is the rate for confectionery or desserts sold in quick-service outlets.
During the hearing, the Bombay High Court had directed that no coercive action should be taken against Mad Over Donuts or its parent company, Himesh Foods, while the case is pending. The court also recorded the DGGI’s assurance that no recovery action would be initiated during the course of the case, and clarified that the petitioner could seek a stay if any recovery notice is issued, as reported by The Free Press Journal.
The case began after the DGGI demanded nearly Rs 100 crore in tax dues from Mad Over Donuts and other bakery chains. The tax authorities argued that donuts, often sold in quick-service outlets, should be classified as bakery products subject to the 18% tax, rather than under restaurant services, which would qualify them for the lower 5% tax.
Abhishek Rastogi, counsel for the petitioner, argued that food served on-site or taken away qualifies as a composite supply of services under the CGST Act, and that it should fall within the 5% tax bracket. He also pointed to government circulars that include takeaway food under restaurant services.
Additionally, the petitioner raised concerns about the DGGI’s centralised show-cause notice, suggesting that separate notices should be issued for each jurisdiction.
The DGGI’s counsel, Jitendra Mishra, clarified that no recovery notices had been issued yet, and the court accepted this assurance.
The High Court has set March 24 as the date for the next hearing and has directed the tax authorities to file their replies by March 17.
Source: NEWS 18
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