The Food Service Sector has been one of the most adversely impacted sectors during the pandemic. With an erstwhile annual turnover of approximately INR 4 Lakh Crore and providing direct employment to over 7 million Indians, the Restaurant Industry today is in a very precarious situation, fighting a grim battle for its survival.
In light of the above, NRAI, being the voice of the Restaurant Industry, has appealed to the Hon’ble Finance Minister to consider a few of its suggestions in the Annual Budget which will help the sector and millions employed in the sector survive these turbulent times.
- The industry has witnessed a very high rate of mortality since the outbreak of the pandemic which has caused immense stress on the sector apart from resulting in job losses to a few million employees in the business.
- We reckon that a large reason for this is the lack of financial resources in the hands of entrepreneurs in the sector.
- We therefore request Hon’ble Finance Minister to kindly treat us a stressed sector and provide us liquidity through banks and other financial institutions with low collateral, low interest and a minimum moratorium of six months.
- This will help the businesses survive till consumption regains the momentum, hopefully by the 3rdquarter of the next fiscal.
Restructuring GST Rates for the Sector
- Currently there is a single rate of GST at 5% and there is no Input tax credit available to us
- While this reduces compliance hurdles for the smaller companies, it does put an additional burden on the operating costs. it also ups the capital outflow on new projects by almost ~20%.
- We therefore propose a multi-layered structure which will not increase compliance process for smaller and single-owner and single-restaurant companies but will give a significant relief to the larger organised players.
- The above amendments will not only improve the GST collection but will also help the operating parameter and fresh investments in the Industry.
Robust E-Commerce Policy for the Sector
- NRAI firmly believes that E-Commerce is a very critical component in taking the size of the Indian economy to the coveted $5 trillion and we are excited to be a part of this revolution.
- However, the policy on the nascent e-commerce for the sector is currently not very well defined. We believe that a fresh and a more equitable policy will be a huge help to the sector and help it grow exponentially.
- Our primary concerns are around the lack of data sharing by the aggregators, their unilateral decision-making on listing and the terms of engagement thereof, year-round platform driven discount that causes losses to the exchequer and the business, very opaque algorithms and ability of these aggregators/market place owners to create their own brands, riding on the restaurant data that they singularly own currently.
Speaking on this subject, Anurag Katriar, President of NRAI; CEO & Executive Director, deGustibus Hospitality says, “Restaurant Industry has perhaps seen one of the highest rates of morality during the pandemic and is gasping for some fresh oxygen. With almost 30% of the restaurants shut down and balance operating at a much-reduced capacity, I reckon that almost 40% of 7.30 million jobs, i.e., approx. three million jobs, have already extinguished. We need some immediate liquidity support to arrest this trend and SURVIVE. I hope that the Hon’ble Finance Minister will treat us a highly stressed sector and offer us required liquidity support with lower collateral, lower interest and adequate moratorium till consumption improves substantially.
He further added, “For our revival, we definitely need an immediate rationalisation of the current GST structure. The current rate of 5% with no Input Tax Credit (ITC) is structurally flawed. It doesn’t distinguish between a kiosk or a five-star hotel and espouses the principle of “one-size-fits-all”. This needs to change. We have suggested a very logical revenue-based variable GST rate structure which will not burden the small players but will immensely help the larger organised players and improve the GST collection. Lastly, 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”.
He concluded by saying, “The Hon’ble FM, Ms Sitharaman is well aware of our travails and has given us many patient hearings in last few months. On behalf of my fraternity, I am hopeful that she will keep us and our requests in mind when she presents the national budget 2021. Hope is a very strong emotion during adversity and I am sure the FM will not break our hope and spirit when she concludes her budget address to the nation”.