2022 budget overlooks restaurant industry woes

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By Kabir Suri

The restaurant industry was looking forward to immediate cash flow support, restoration of input tax credit (ITC) on GST, ease of doing business instead of over-regulation and over-licensing , and a fair and equitable e-commerce policy for the survival and recovery of the restaurant sector by the Minister of Finance today.

However, it was very disappointing to see that no specific announcement was made for the restaurant industry by Nirmala Sitharaman in the Union budget, and we are left to our own devices yet again.

The hospitality sector was first mentioned by Sitharaman when it announced the extension of the Emergency Line of Credit Guarantee (ECLGS) program until March 2023, which will allow for an extension of a year of the moratorium for loans granted under the ECLGS program. However, this may alleviate current cash flow problems only for certain businesses that have existing lines of credit or outstanding available loans.

Globally, the restaurant industry has been among the hardest hit by the Covid-19 pandemic, with India being no exception. In FY21, India’s foodservice industry contracted sharply leading to the permanent closure of more than 25% of food business operators, resulting in job losses of almost 24 000 people.

In FY21, India’s foodservice industry declined by 53% and was estimated at INR 2,00,762 Cr compared to INR 4,23,624 Cr in FY2020.

The industry employs 73 lakh people and is one of the biggest job generators for the economy. The need of the hour is immediate liquidity support with lower collateral, lower interest and an adequate moratorium for survival.

There is an urgent need to immediately rationalize the current structure of the GST. The restaurant industry has been singled out for the elimination of the input tax credit (ITC). The very concept of ITC is at the heart of, and in fact is, the raison d’être of the GST, which is to prevent tax cascading (tax on tax). Ours is the only industry that does not benefit from this advantage.

There are three B2B service industries closely related to us, which are banking, insurance and real estate, which after the GST, have been allowed ITC on any supply of goods including capital goods. We urge the Indian government to reintroduce ITC for restaurants.

Additionally, as e-commerce becomes a very critical arm for the overall economic growth of the nation, we seek a strong and fair e-commerce policy in the restaurant industry. This will help us grow the segment exponentially which will also boost the Treasury.

Moreover, it takes more than two dozen licenses and permissions to be able to serve a sandwich. Rather than serving our customers, we spend most of our time browsing departments. Therefore, I would like to take this opportunity to again call for the introduction of a uniform policy that includes one-stop customs clearance and a reduction in the number of licenses required to operate a restaurant.

The restaurant industry has been a significant contributor to the overall economy of the country. It contributes almost five times more than the hotel sector to the country’s GDP. As the services sector is the third largest contributor, after retail and insurance, to sustained long-term growth, the government must recognize its growing contribution and give it “industry” status.

Kabir Suri, co-founder and director of Azure Hospitality, is currently the president of the National Restaurant Association of India (NRAI).

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