Restaurant Service Or Bakery Product? Bombay High Court To Decide If Donuts & Cakes Should Be Taxed At 5% Or 18% Under GST

The Bombay High Court is to decide whether the donuts and cakes should be classified as restaurant service or a bakery product under Goods and Services Tax. The Division Bench of Justices B.P Colabawalla and Firdosh P. Pooniwalla were addressing the issue of whether the supply of donuts falls within the ambit of restaurant services under Service Accounting Code (SAC) 9963 or should be categorized as a bakery product subject to separate tax treatment under the Goods and Services Tax (GST) framework. If the donuts and other bakery items classified under restaurant services they would be taxed at 5% and if they classified under bakery product, they would be subjected to tax upto 18%. In this case, a show cause notice was issued to the Mad Over Donuts (Himesh Foods) / assessee by DGGI demanding Rs. 100 crores (Approx.) in tax dues seeking 18% GST on sale of donuts and other bakery items. Assessee argued that under the Central Goods and Services Tax (CGST) Act, the supply of food or other edible articles qualifies as a composite supply of services. It was further contended that the relevant GST rate notifications explicitly define restaurant services to include food supplied at restaurants, eating joints, messes, and canteens, whether for consumption on the premises or as takeaway. It was highlighted that a government-issued Circular supports this interpretation by confirming that takeaway services should be classified as services and taxed at 5%. The assessee further submitted that clarity is required on whether tax authorities can consolidate multiple years in a single SCN or if they are obligated to issue separate notices for each assessment period. The department submitted that no recovery notice has been issued till the date against the Mad Over Donuts and therefore the apprehension of the assessee is wholly unfounded. During the proceedings, the bench recorded the department's statement that no coercive action will be initiated by the tax authorities regarding the disputed classification issue. “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,” added the bench. In view of the above, the bench directed the department to file a reply and accordingly listed the matter on 24th March 2025 for further hearing. Case Title: M/s. Himesh Foods Pvt Ltd. v. Union of India & Ors. Case Number: WRIT PETITION NO.718 OF 2025 Counsel for Petitioner/ Assessee: Abhishek A Rastogi, Pooja Rastogi and Meenal Songire Counsel for Respondent/ Department: Jitendra Mishra Click Here To Read/Download The Order

Restaurant Service Or Bakery Product? Bombay High Court To Decide If Donuts & Cakes Should Be Taxed At 5% Or 18% Under GST

Mehak Dhiman

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