Covid-ravaged catering industry calls for tax exemption


NEW DELHI : Restaurants call for tax simplification, tax exemptions or a reduction in fees for excise services, among others, from the government as they struggle amid the coronavirus pandemic. According to the National Restaurant Association of India, the representative body of restaurants, the industry has seen its activity halved for ??2.0 trillion in FY21 from ??$ 4.23 trillion in fiscal 2020, as the pandemic forced nearly 30% of restaurants to close permanently.

In 2020, when the coronavirus pandemic first hit, the government offered unsecured loans of ??3 lakh crore to MSMEs in general to improve working capital needs and restaurants.

These loans had a one-year moratorium and could be repaid over four years.

But restaurateurs said they had by no means taken advantage of the move. “The moratoriums are not working for us, rather we need a tax holiday or an exemption allowing us to be relieved of the payment of our sales taxes for one year”, said Ajit Shah, partner at White Panda. Hospitality, which has three restaurants in Delhi, including Kiko Ba and Tera Vita.

For at least four years, the industry has been asking for clarification on the GST input credit. Simply put, when a restaurant purchases a good or product for ??He pays the GST on that product directly to the government. This amount of GST ranges from 5 to 28% on the input purchased. He then charges 2.5% SGST and 2.5% GST on the food sold to the customer. But he does not receive any input credit for the goods he has purchased. Which, according to industry players, is a competitive disadvantage, as all other industries are taking it back.

“We are the only industry in India that does not recoup input credits. Last month we had a budget appeal with the Minister of Finance, but as the catering sector does not fall under any particular ministry, it loses, ”said NRAI President Kabir Suri.

The food and beverage industry has been among the hardest hit despite being one of the fastest growing in the country and one of the largest providers of jobs, said Dawn Thomas, co- founder of VRO Hospitality, based in Bengaluru and which manages Hangover. and Mirage. “It is high time that the sector comes under a dedicated ministry,” he added.

In FY 22, quick service restaurants (QSRs) and cloud kitchens performed well, but gourmet restaurants, pubs, bars and clubs were affected, he said. Restaurants like his have taken a hit on the balance sheet due to the GST issue and other operational issues such as curfews and closures causing major business disruption. “As an industry we need a tax holiday and don’t get moratoriums because ultimately we still have to pay back loans,” Thomas said.

Gauri Devidayal, co-founder and director of Food Matters India, which operates restaurants like The Table and Mag St Bread Co in Mumbai, said it is a capital-intensive industry with significant investments required upstream before the company is operational. “We also have to pay 18-28% GST on most things. We pay excise fees in advance at the start of the year. It takes up to a year for restaurants to open their business and it can become a huge burden. ” she said.

The main industry demand is for the government to consider allowing restaurants to accept input credit on the GST, she said.

In the restaurant business, licenses are issued by each state, including fees paid to various state excise services for different types of liquor licenses.

When the devastating second wave hit in April 2021, most restaurants had already paid high license fees to state excise. These fees are collected in advance in March of each year. In 2021, most restaurants were virtually closed for two months.

In some sort of repetition, the Delhi government on Monday ordered restaurants to close, given the daily increase in covid cases, especially the Omicron variant. Others have also put strict restrictions, hurting business.

“The business operates by generating cash flow, so when there are issues like schedule or capacity restrictions and high license fees, they hit us badly. The government just needs to be a little more forgiving to understand that restaurants are just not an indulgence but part of a social fabric and huge job generators, ”Devidayal added.

To subscribe to Mint newsletters

* Enter a valid email address

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our app now !!


About Author

Comments are closed.