On Monday, the National Restaurant Association of India (NRAI) appealed to the government to reinstate input tax credit for restaurants. They proposed an increase in the GST rate from the existing 5% to 12% in anticipation of the upcoming Union Budget.
In a letter addressed to Finance Minister Nirmala Sitharaman, the NRAI emphasized the need for a just and fair e-commerce policy. They stressed the importance of balanced policies and regulations that foster a level playing field, allowing platforms to innovate, while ensuring the protection of restaurants, delivery partners, and consumers from potentially exploitative practices.
The restaurant industry, significantly affected by the pandemic, has shown great resilience in overcoming challenges and is currently on a steady path to recovery. According to a statement by the National Restaurant Association of India (NRAI), providing the sector with certain policy and budgetary support in the upcoming Budget could propel it towards an accelerated pace of growth.
NRAI Pushes for ITC Restoration
Seeking restoration of GST input tax credit (ITC), the industry body said, “It is the only industry to be pegged at 5 per cent GST without the availability of ITC; a feature designed to avoid cascading taxation”.
The lack of ITC not only reduces the operating margin of the business but also enhances the capital budget for a new project significantly. This increased project cost slows down the expansion plans, which massively impacts the overall growth of the sector, it added.
“The industry, therefore, recommends restoration of ITC to the restaurants while parallelly increasing the rate of GST to 12 per cent from the current 5 per cent,” NRAI said. It further said, “We understand that it may create a compliance burden on the smaller businesses, and therefore, we feel that this can be done on revenue slabs. While restaurants below a certain revenue threshold can continue with the current GST provisions, the organised sector with higher revenues and capex outlay may move towards the proposed GST regime”.
NRAI President Kabir Suri said the growth of the food services industry in India holds immense potential. The industry not only plays a pivotal role in contributing to government revenue but is one of the largest employers in the country.
“Balanced, fair and equitable policies by the government with respect to GST input tax credit, rationalised licensing norms and e-commerce policy will not only benefit businesses and consumers but also make a substantial contribution to overall economic growth and employment opportunities,” said Suri, who is also the co-founder & Director of Azure Hospitality Pvt Ltd.
On an equitable and fair e-commerce policy, NRAI said the online platforms, while bringing convenience, have also created concerns regarding fair competition and equitable growth. It also sought a grant of “industry status” to the food services sector, considering “the immense contribution” to the country’s economy.
“This will bring in multiple benefits through central or state industrial policies, including easier finance, special schemes, subsidies, fast-track clearance processes etc. It will also encourage enterprise as well as entrepreneurship,” the letter to the Finance Minister said.
NRAI Calls for License Streamlining
NRAI also called for the streamlining of licenses and NOCs, pointing out that, on average, a restaurant needs to obtain 15-25 licenses/NOCs to initiate and run an outlet.
“This myriad of licences and permits inhibits food businesses in growing beyond their core geographies and adds to the operational complexity and compliance burden,” it said.
The industry body also asked the finance minister for targeted subsidy schemes and access to debt financing for SMEs to consider subsidies on essential ingredients, utilities, and waste management to reduce operational costs for struggling restaurants, particularly in smaller towns and cities.
It also asked the government to consider allowing longer working hours for the restaurant sector and reducing GST on bagasse and other eco-friendly materials that are used as packaging material for home delivery.
