Restaurants are looking for simplification in taxes, tax holidays, or reductions in fees given to excise departments, among other things, from the government as they struggle with the coronavirus pandemic.
As per the National Restaurant Association of India, the representative body of restaurants, the industry has seen its business halved to Rs. 2.0 trillion in FY21 from Rs. 4.23 trillion in FY20, with the pandemic having forced nearly 30% of restaurants to shut down permanently.
In 2020, when the coronavirus pandemic first hit, the government offered collateral-free loans of Rs. 3 lakh crore to MSMEs in general to improve their working capital requirements, and restaurants.
These loans came with a one-year moratorium period and could be repaid in four years. But restaurateurs said they did not benefit from the move in any way. For at least four years, the industry has been asking for clarity with respect to the GST input credit. Simply put, when a restaurant buys a good or product for Rs.100 to cook with, it pays direct GST on that product to the government.
This GST amount ranges from 5–28% of the input purchased. It then subsequently charges 2.5% SGST and 2.5% GST on food sold to the customer. But it does not receive any input credit for the goods it purchases. Which, industry players said, is a competitive disadvantage as all other industries get this back.
NRAI president Kabir Suri said that they are the only industry in India that does not get input credits back. Last month we had a budget call with the finance minister, but since the restaurant industry does not fall under any particular ministry, it loses out.
In FY22, quick-service restaurants (QSRs) and cloud kitchens have done well, but fine-dining restaurants, pubs, bars, and clubs have been hit. Restaurants like his have taken a hit on the balance sheet because of the GST issue and other operational issues like curfews and lockdowns that have caused major business disruptions.
The industry’s major ask is that the government consider allowing restaurants the choice of taking input credit on GST. In the restaurant business, licencing is done by each state, including the fee paid to various state excise departments for different kinds of liquor licences.
When the devastating second wave hit in April 2021, most restaurants had already paid a heavy licence fee to state excise. This fee is collected upfront in March every year. In 2021, most restaurants were practically shut for two months.