Karnataka HC Halts ₹50 Cr GST Demand on Donut Chain
By Author | April 29, 2025 | Karnataka HC, GST News
GST Dispute Over Food Classification
Is a donut a bakery item or restaurant food? That question is now central to a major GST case. The Karnataka High Court has stayed a ₹50 crore tax demand issued to Mad Over Donuts.
The decision brings temporary relief to the company while the court decides the correct tax classification for its products.
Tax Rates in Focus
Under current rules, food sold in restaurants attracts 5% GST, while packaged or takeaway food from bakeries faces 18% GST.
Justice SR Krishna Kumar is reviewing whether donut sales qualify as restaurant services or bakery goods.
Company’s Argument
Himesh Foods, which owns Mad Over Donuts, argued that its offerings qualify as composite restaurant services. Their lawyer, Abhishek A Rastogi, emphasized that whether customers eat on-site or take food away, the service should fall under the 5% GST category.
Bombay HC Order Cited
The legal team referred to a Bombay High Court ruling, where tax officials agreed not to take action until a similar issue was resolved.
The Karnataka HC accepted this precedent. The court ordered that no coercive steps be taken until the next hearing.
Court’s Observations
Justice Kumar highlighted the need for judicial consistency. He noted that the same petitioner had already received relief in Mumbai.
Hence, Karnataka GST authorities must pause enforcement actions until June 6.
Expert Commentary
A tax expert explained that a central GST agency had already issued a consolidated notice covering similar cases in other states. Despite this, Karnataka’s department raised a separate demand.
The expert stressed the importance of monitoring such overlaps to avoid duplicate legal battles.
Final Notes
With the next hearing set for June 6, this case could set a precedent for how bakery chains are taxed nationwide. Businesses in the food and beverage sector should watch closely.
