COURTKUTCHEHRY SPECIAL ON GST TAX DISPUTE ON DONUTS CLASSIFICATION
Bombay High Court Grants Interim Relief to Mad Over Donuts Parent in GST Classification Dispute
Court Questions 5% vs 18% GST Rate on Bakery Products
Interim Relief Provides Breathing Space for Food Industry Players
By Our Legal Correspondent
New Delhi: January 24, 2026:
In a significant development for India’s food and beverage sector, the Bombay High Court has granted interim relief to the parent company of Mad Over Donuts (MOD) in a dispute over the classification of bakery products under the Goods and Services Tax (GST) regime. The case revolves around whether donuts and similar items should attract a concessional 5% GST rate applicable to bakery goods or the higher 18% rate applicable to restaurant services.
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The ruling is expected to have wide implications for the food industry, particularly quick-service restaurants and bakery chains, which have long debated the correct classification of their products under GST.
Background of the Case
The dispute began when tax authorities classified donuts sold by MOD’s parent company under the 18% GST slab, arguing that they constituted restaurant services rather than bakery products. The company contested this classification, claiming that donuts are bakery items and should fall under the 5% concessional rate.
The company approached the Bombay High Court, seeking relief against the higher tax demand. The Court, while not deciding the matter conclusively, granted interim relief, allowing the company temporary protection from coercive recovery measures until the case is fully adjudicated.
Court’s Observations
The Bombay High Court made several important observations:
- Classification Dispute: The Court acknowledged that the issue of whether donuts qualify as bakery products or restaurant services requires detailed examination.
- Interim Protection: Until the matter is resolved, the company will not face coercive recovery of the disputed tax amount.
- Industry Impact: The Court noted that the classification issue affects not just MOD but the broader food and beverage industry.
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The Court’s interim order provides breathing space for the company while the legal battle continues.
Implications of the Ruling
The interim relief has several implications:
- Relief for MOD: The company avoids immediate financial burden from higher tax demands.
- Precedent for Industry: Other bakery chains and quick-service restaurants may rely on this ruling in similar disputes.
- GST Clarity Needed: The case highlights the need for clearer guidelines on classification of food items under GST.
- Revenue Considerations: The government may face challenges in maintaining revenue consistency if more items are classified under concessional rates.
Expert Reactions
Tax experts and industry professionals have reacted positively to the ruling:
- Chartered Accountants: Say the case underscores the importance of precise classification under GST.
- Food Industry Executives: Believe the interim relief will encourage businesses to contest unfair classifications.
- Policy Analysts: Argue that the government should issue clearer notifications to avoid prolonged litigation.
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Broader Significance
The case is part of a larger debate on GST classification of food products. Items like ice cream, cakes, pastries, and donuts often fall into grey areas between bakery goods and restaurant services. The outcome of this case could set a precedent for how such items are taxed in the future.
The ruling also highlights the judiciary’s role in balancing revenue interests with fairness to taxpayers. By granting interim relief, the Court has ensured that businesses are not unduly burdened while disputes are pending.
Conclusion
The Bombay High Court’s interim relief to Mad Over Donuts’ parent company in the GST classification dispute is a landmark in India’s tax jurisprudence. It underscores the complexities of GST classification and the need for clearer guidelines to avoid litigation.
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