Background
The Bombay High Court is set to rule on a key tax dispute regarding the Goods and Services Tax (GST) applicable to donuts. The case arises from a petition filed by a food business challenging the classification of donuts under the GST framework. Currently, baked goods such as bread attract a lower GST rate of 5%, while confectionery and desserts, including cakes and pastries, are taxed at 18%. The petitioner contends that donuts, being baked and similar to bread, should be taxed at the lower rate, while tax authorities argue that they fall under the 18% category due to their preparation and consumption style.
Court’s Rationale
During the proceedings, the High Court examined whether donuts should be considered akin to bread or categorized as a confectionery item. The petitioner emphasized that donuts are made from a yeast-leavened dough, similar to bread, and are not always sweet, whereas tax authorities pointed out that donuts, especially when glazed or filled, resemble desserts rather than staple food items. The court is evaluating the intent of GST classification, which aims to differentiate between essential food products and luxury or indulgent items.
Existing Measures
GST classification disputes have been common in the food industry, with past rulings determining different rates for items like biscuits, chocolates, and even ready-to-eat foods. The tax slab for food products often depends on processing, packaging, and whether an item is considered a necessity or a luxury. A ruling in this case could set a precedent for other bakery products that straddle the line between staple food and confectionery.
Conclusion
The Bombay High Court’s verdict will have significant implications for the food industry, particularly bakeries and quick-service restaurants. If ruled taxable at 5%, donut sellers could benefit from lower costs, potentially reducing consumer prices. However, if classified under the 18% slab, it would confirm donuts as a premium food item subject to higher taxation. The decision is expected to clarify the broader GST framework for similar food products in India.