The Bombay High Court is scheduled to hear the Rs 100 crore GST dispute involving Mad Over Donuts (MOD) on March 24, 2025. The case, which focuses on whether the supply of donuts should be considered a composite supply of services or a separate taxable product, could set a significant precedent for the food and beverage industry in India. The decision is expected to provide clarity on tax classifications under the GST framework.
The Bombay High Court is set to hear the Rs 100 crore Goods and Services Tax (GST) dispute involving Mad Over Donuts (MOD) on March 24, 2025. The outcome of this case is expected to have far-reaching implications on how restaurant and bakery services are taxed under the GST framework in India. The court’s decision could provide much-needed clarity on whether takeaway food should be taxed as a service or as a separate sale of goods.
Background of the Case
Mad Over Donuts (MOD), owned by Himesh Foods, is a well-known bakery chain in India, specializing in donuts and other confectionery products. The dispute arose when the Directorate General of GST Intelligence (DGGI) issued a consolidated show-cause notice (SCN) covering multiple financial years from 2017-18 to 2023-24, demanding approximately Rs 100 crore in unpaid taxes.
At the core of the dispute is the classification of MOD’s products under the GST regime. The company argues that its sales should be considered a composite supply of services, taxed at 5% GST, while tax authorities classify them as goods, attracting a higher tax rate.
Legal Arguments
Representing MOD, tax expert Abhishek A Rastogi pointed to the provisions of the Central Goods and Services Tax (CGST) Act, stating that food supplied in restaurants and takeaways should be classified as services under Entry No. 6(a) of Schedule II. He cited GST notifications and government-issued circulars that confirm the 5% tax rate for restaurant services, including takeaway food.
Rastogi also raised concerns about the procedural validity of issuing a single show-cause notice covering multiple years and different GST registrations. He argued that tax authorities should issue separate notices for each assessment period rather than consolidating multiple years into one notice, as this could create compliance and legal challenges.
Implications for the Industry
If the Bombay High Court rules in favor of MOD, the decision could significantly impact how tax authorities classify food sales across the industry. A clear definition of composite supply under GST could simplify compliance for restaurants, bakeries, and takeaway businesses, reducing tax disputes and legal uncertainties.
The court has directed tax authorities to file their response by March 17, and the next hearing is scheduled for March 24, 2025. Until then, no coercive action will be taken against MOD regarding the disputed tax classification. The final ruling will determine whether MOD and similar businesses will be taxed as service providers or as sellers of goods.
Industry Reactions
The case has drawn attention from various stakeholders in the food and beverage industry. Restaurant and bakery owners believe the ruling will create uniformity in taxation and reduce legal complexities. Some experts argue that if MOD wins, similar businesses may also seek reclassification, potentially altering tax revenue collection patterns.
With the hearing set for March 24, industry players are closely watching the Bombay High Court’s decision, which could redefine the GST framework for the food and beverage sector in India.
