The Karnataka High Court has paused a ₹50 crore GST demand against Himesh Foods Private Limited, which runs the Mad Over Donuts chain. Justice S R Krishna Kumar issued the interim order on Friday, instructing authorities not to take coercive action until the next hearing on 6 June.
Dispute Over GST Rate on Bakery Items
The case focuses on how GST should apply to donuts, cakes, and similar bakery products. The question is whether these items fall under restaurant services, taxed at 5%, or as standalone bakery goods, taxed at 18%.
Himesh Foods argued that its operations involve a composite supply of services under the Central Goods and Services Tax (CGST) Act. The company said that food sold for dine-in or takeaway should both qualify as restaurant services under GST law.
Reference to Bombay High Court Order
Advocate Abhishek A Rastogi, appearing for Himesh Foods, pointed to a similar case pending before the Bombay High Court. In that matter, the Directorate General of GST Intelligence (DGGI) had agreed not to take coercive steps while the classification issue remained undecided.
The Karnataka High Court agreed that similar treatment was necessary. Justice Krishna Kumar stated that judicial consistency must apply since the petitioner and issues were identical. He directed Karnataka’s GST authorities not to proceed with any enforcement until further court orders.
The judge said, “… in the light of the undertaking given by the respondents (tax authorities) in relation to the very same petitioner (‘Mad Over Donuts’) before the Bombay High Court, respondents are directed not to take any precipitative/coercive steps till the next date of hearing.”
Duplicate Tax Actions Questioned
Despite the DGGI in Mumbai issuing a consolidated notice covering the same tax issues across several states, Karnataka’s State GST authorities raised a separate demand. Himesh Foods challenged this second action before the High Court.
Sandeep Sehgal, Partner at tax firm AKM Global, said the development highlights the risks of duplicate proceedings. “The company pointed out that a consolidated notice already existed. Still, Karnataka authorities attempted to raise a fresh demand. Businesses must monitor overlapping actions and respond quickly,” he said.
Next Hearing Scheduled for 6 June
The GST rate for food depends on how the supply occurs. Restaurants attract 5% GST. Packaged goods or food sold outside a restaurant setting attract 18%.
The court will now decide whether Mad Over Donuts’ outlets qualify as restaurants under the CGST Act. The ruling may impact how similar bakery chains across India are taxed.
For now, Himesh Foods has secured relief, as the ₹50 crore demand will remain on hold until the next hearing.
For businesses dealing with GST disputes or compliance issues, Vakilsearch offers expert services in GST registration and tax advisory.
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