Karnataka HC weighs in on GST classification of bakery products in Mad Over Donuts case
In a move which is likely to have potential repercussions for the food and beverage industry, especially bakery businesses, the Karnataka High Court on April 25 heard arguments in a pivotal tax classification dispute regarding the Goods and Services Tax (GST) treatment of donuts, cakes, and other bakery products.
The case of Mad Over Donuts, which was heard by Justice SR Krishna Kumar, on the pretext whether these products should be classified under restaurant services, attracting a concessional 5% GST rate, or as bakery goods, which might incur a different tax treatment.
Representing the petitioner, Himesh Foods (Mad Over Donuts), tax and constitutional law expert Abhishek A Rastogi argued that the supply of food products like donuts and cakes constitute a composite supply of services, as defined under the CGST Act. According to the petitioner, the provision of food at restaurants, eateries, canteens, and messes — whether consumed on-premises or taken away — fall under the category of restaurant services, which are taxed at a lower GST rate of 5%.
The petitioner referred a recent interim order of the Bombay High Court, which sided with the petitioner’s argument and expressed a prima facie view that such supplies could indeed be considered services under GST law.
The issue raised during the proceedings was the issuance of multiple show-cause notices by different state authorities, despite a consolidated notice having already issued by the Directorate General of GST Intelligence (DGGI) in Mumbai. The petitioner contended that this amounted to duplicity and harassment, particularly since the central authority had already assumed jurisdiction over the matter.
