The Bombay High Court is set to decide if doughnuts should be classified differently from bakery goods and charged 5% Goods and Services Tax, as applicable on food served at restaurants.

On Monday, a division bench of Justices BP Colabawalla and Firdosh P Pooniwalla was hearing a petition by the Indian arm of the restaurant chain Mad Over Donuts, challenging a show-cause notice issued by the Directorate General of Goods and Services Tax Intelligence, reported Live Law.

The law enforcement agency had directed Mad Over Donuts to pay Rs 100 crores in dues, seeking 18% tax on Goods and Services Tax on sale of donuts and other bakery items.

The restaurant chain was held guilty of tax evasion for misclassifying its business as a service provided by a restaurant, cafe, or eating facility, according to Live Law.

In its petition, the restaurant argued that since it has a kitchen at its outlets for heating, garnishing, filling and dipping, the donut qualifies as a restaurant service.

It further told the court that Goods and Services Tax notifications define restaurant services to include food supplied at restaurants, eating joints, messes and canteens – regardless of whether they are consumed on-site or takeaway.

The matter has been listed for further hearing on March 24.