Budget 2022 overlooks restaurant industry woes

The food industry was among the hardest hit during the pandemic

By Kabir Suri

The restaurant industry was eagerly looking forward to some immediate liquidity support, restoration of Input Tax Credit (ITC) on GST, ease of doing business instead of over-regulation and excessive licensing, and a fair and equitable e-commerce policy for the survival and revival of the restaurant sector from the Finance Minister today.

However, it was very disappointing to see that no specific announcements were made for the restaurant industry by Nirmala Sitharaman in the Union Budget, and we are yet again left to fend for ourselves.

The hospitality sector was mentioned for the first time by Sitharaman when she announced the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) till March 2023, which will allow a one-year moratorium extension for loans availed under the ECLGS Scheme. However, it may ease current liquidity issues only for some businesses which have existing credit lines or outstanding sanction available loans.

Globally, the food services industry was amongst the hardest hit by the Covid-19 pandemic, with India being no exception. In FY21, the Indian food services industry contracted severely leading to the permanent closure of over 25 per cent of food business operators, which resulted in job losses of nearly 24 lakh people.

In FY21, the Food Services Industry in India declined by 53 per cent and was estimated to be worth 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 largest employment 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 for an immediate rationalization of the current GST structure. The restaurant industry has been singled out by the removal of the Input Tax Credit (ITC). The very concept of ITC is central to, and is in fact, the raison d’être of GST, which is to prevent cascading of taxes (tax over tax). Ours is the only industry that does not receive this benefit.

There are three B2B service industries closely linked with us, which are banking, insurance and real estate, which post-GST, have been allowed ITC on any supply of goods including capital goods. We would urge the Government of India to re-introduce ITC for restaurants.

Additionally, with e-commerce emerging as a very critical arm for the overall economic growth of the nation, we seek a strong and equitable e-commerce policy in the food service sector. This will help us grow the segment exponentially, which will also boost the exchequer.

Furthermore, it takes over two dozen licenses and permissions to be able to serve a sandwich. Rather than serving our customers, most of our time is spent running around departments. Therefore, I would like to take this opportunity to once again request the introduction of a uniform policy that includes Single Window Clearance and a reduction in the number of licenses required for operating a restaurant.

The restaurant industry has been a significant contributor to the country’s overall economy. It contributes almost five times more than the hotel sector to the country’s GDP. Being the third-largest contributor in the service industry, after retail and insurance, for sustained growth over the long term, the Government needs to recognise its increasing contribution and give it an "industry" status.

Kabir Suri, Co-Founder & Director, Azure Hospitality, currently serves as the President of the National Restaurant Association of India (NRAI).