NRAI urges FM for support in Union Budget'24

The Indian restaurant industry is one of one of the highest employment creators in India and will directly employ 8.5 million Indians by end-2024. The size of food services sector is 33.5x of the film industry, 2.18x of the hotel industry and 1.26x of the pharma industry of India and is the third largest industry in India, valued at Rs 5.69 lakh crore.

India is set to become the third-largest food services market by 2028, surpassing Japan, and is the second-fastest-growing food services industry globally, after Brazil. Given this trajectory, the National Restaurant Association of India (NRAI) believes that with appropriate policy and budgetary support in the upcoming budget, the sector's growth could be expedited.

Key policy requests
Restoration of GST and ITC The restaurant industry currently operates under a 5 per cent GST regime without the benefit of ITC. This situation reduces operating margins and increases the capital budget for new projects, thereby slowing down expansion plans. Hence, NRAI proposed restoration of ITC for restaurants while increasing GST to 12 per cent.

Creation of a separate food services ministry / department As per the support advice circulated by NRAI, a dedicated ministry or department could significantly boost the organised growth of the sector. The vast array of regional Indian cuisines is a powerful soft asset for India, potentially driving tourism. A dedicated ministry could streamline regulations and enhance growth.

Grant of industry status Given its significant economic contribution; the food services industry has to be accorded with industry status. This would facilitate access to finance, special schemes, subsidies and fast-track clearances, thereby encouraging entrepreneurship and expansion.

Rationalisation of licenses / NOCs The requirement for numerous licenses and permits to operate a restaurant inhibits growth and adds to operational complexity.

Equitable and fair e-commerce policy Online platforms have brought convenience but also concerns regarding fair competition. Balanced regulations are a need to ensure a level playing field where platforms, restaurants, delivery partners, and consumers are protected from exploitative practices.

Reinstating Service Export from India Scheme (SEIS) To boost the sector's growth by leveraging its foreign exchange generation capabilities, NRAI has requested for the reinstation of SEIS with a duty credit of 10 per cent of the foreign exchange earned by restaurant entities.

Employee welfare plan With the restaurant industry employing over 8.5 million people, NRAI urged the Government to introduce welfare plans funded by central and state governments, which would further support employees during their tenure and beyond.

Reduction of GST on commercial rentals (revenue share) NRAI feels that high GST on commercial rentals without ITC availability significantly impacts the bottom line. Thus, NRAI has requested the restoration of ITC or a reduction in GST on rentals to 5 per cent with a preference for the former.

Reduction of GST on bagasse and other eco-friendly materials NRAI supports enhanced sustainability efforts, such as using eco-friendly packaging. However, the higher GST on biodegradable materials compared to plastic discourages their adoption. Thus, NRAI has requested a reduction in GST on these materials would promote their use.

Targetted subsidy schemes and access to debt financing for SMEs As per NRAI request, Subsidies on essential ingredients, utilities, and waste management, along with easier access to debt financing, would support struggling restaurants, especially in smaller towns and cities. Subsidised lending could spur growth and make financing more accessible.

Speaking on the same, Kabir Suri, President, NRAI, said, "The sector contributes 1.4 per cent to GST collection and is today second largest employers in the country. Our industry currently does not receive input tax credit on expenses, and we are hopeful for a change in this budget to allow for input tax credits. Additionally, we propose a dual GST policy of a 5 per cent GST rate and a 12 per cent GST rate with input tax credit. This approach would enable us to offset current expenses, increase capital expenditure, open more restaurants, and ultimately generate more employment and revenue for the government. I am hopeful that the Hon’ble Finance Minister will consider our requests to boost the growth of the industry. I believe that our proposal for a dedicated Ministry or Department for the Restaurant Industry could be a game-changer, leading to exponential growth in the sector."