Mad Over Donuts gets GST breather: Bombay HC stays 18% tax on itemized sales
The Bombay High Court has granted interim relief to Himesh Foods Pvt. Ltd., the operator of the Mad Over Donuts chain, staying a GST demand that sought to levy tax at a higher rate by treating individual food items as separately taxable supplies. The order is being closely tracked by India’s food and beverage industry, where restaurants and cafés continue to face disputes over GST classification and rates.
Himesh Foods had approached the High Court challenging a show cause notice issued under Section 74 of the CGST Act, followed by an adjudication order raising GST demands on the ground that donuts sold by the company were liable to 18% GST based on item-wise classification. The company has contended that its supplies qualify as restaurant services, which attract a concessional GST rate.
A Division Bench comprising Justice G.S. Kulkarni and Justice Aarti Sathe stayed the impugned adjudication order and directed that the matter be listed for final hearing on February 26, 2026.
GST Council intent and composite supply argument
Appearing for the petitioner, Abhishek A. Rastogi, Founder of Rastogi Chambers and a tax and constitutional law expert, argued that the GST framework clearly reflects the GST Council’s intent to rationalise tax rates in the food sector, with the objective of ensuring that benefits are ultimately passed on to consumers.
According to Rastogi, this intent is evident from the statutory provisions of the GST law, the rate notifications issued from time to time, and clarifications released by tax authorities. These, he submitted, recognise that supplies made by restaurants or food outlets are to be treated as a composite supply of services, rather than as individual supplies of goods.
He argued that once the law and notifications leave no ambiguity on this position, any attempt by tax authorities to dissect restaurant transactions and classify the sale of donuts as itemised goods is legally untenable. Such an approach, Rastogi submitted, amounts to manifest arbitrariness, as it contradicts the taxation framework consciously designed by the GST Council and implemented through binding notifications.
