MumbaiA few moments ago
- Copy link
The Bombay High Court will decide whether Donuts is a bakery product today i.e. on Monday 24 March. With this decision, it is to decide whether it will cost Goods and Service Tax i.e. GST 5% or 18%.
If Donuts comes in the category of bakery product, it will be taxed at 18% and if the restaurant service comes in the category, only 5% GST will be charged.
The case came after the petition of Himesh Foods Private Limited, a parent company of Singapore based Madon Over Donuts (MOD), which has challenged the show notice issued by Directorate General of GST Intelligence in the Bombay High Court.
Petitioner’s lawyer said- 5% GST should be applied
MOD lawyer Abhishek A. According to Rastogi, 5% GST should be applied on Donuts as the supply of food or other adible products comes under the category of composite supply of services under Central GST. Food products supplied in restaurant services, food places, foods and foods supplied in canteen are taxed at 5% tax.
What is the whole matter?
The case begins on 3 August 2024 with a show cause notice sent by the Directorate General of Goods and Service Tax Intelligence (DGGI) to Madon Over Donuts.
The notice asked Singapore based company to pay Rs 100 crore tax and fine. DGGI accused the company, it has wrongly classified its business. That is, bakery products are selling in the name of restaurant service.
Similar notices were also sent to companies such as other donuts chain Dunkin Donuts and Crispy Cream. Subsequently, Himesh Food -owned Donut Chen MOD filed a case for the case of case in Bombay High Court.
The company asked the court whether Donuts’ supply is a restaurant service or bakery production. Service accounting code (SAC) is used for identification, classification, measurement and determination of GST rate for services in India.
Court said- 5% tax should be levied
Hearing of the case Justice B.P. Kolabawala and Justice Firdaus are on the back of Pooniwala. In the earlier hearing, a bench of judges had said that donuts should be taxed at a rate of 5% applied to the food served in the restaurant.
However, DGGI claimed that Donuts are a bakery product and should be imposed 18% tax on it. According to DGGI, Donuts are a confectionery or desert sold in the fast service shop, it will be taxed accordingly.
What is composite supply?
Composite supply is when two or more goods or services are supplied simultaneously. These items are connected among themselves, that is, it is not possible to separate them.
This entire supply chain has a main product or service and the rest has subsidiary products. Taxes on these are also charged according to the rules fixed on the main product.
Understand this with some examples …
- Stay in the hotel: When you book a room in the hotel and your bill involves breakfast or food, it is a composite supply. Here is the main supply hotel room i.e. service and breakfast or food is helpful. GST will only be applicable with the rate of hotel services.
- Bag with laptop: If a company gives a bag free with a laptop, it is a composite supply. The main supply is and the bag is its subsidiary. GST will be on laptop.
- Car servicing: If free polishing is given with the service of the car, then servicing is main supply and polishing its subsidiary. Therefore, tax will be levied only at the rate of servicing.