Economy

F&B writes to Finance Ministry for reliefs in Budget

Forum Gandhi Mumbai | Updated on January 28, 2021 Published on January 28, 2021

NRAI seeks ‘multi-layered ideal GST rate structure’ for different segments of F&B industry

 

The food and beverages (F&B) sector, among the worst-hit post the Covid-19 pandemic, has written to the Finance Ministry seeking relief in the upcoming Budget. The National Restaurant Association of India (NRAI) has recommended a ‘multi-layered ideal GST rate structure’ for different segments of the F&B industry. NRAI has also sought a firm e-commerce policy while seeking liquidity reliefs.

In its letter to the FM, the NRAI said that currently there is a single rate of GST at 5 per cent, with no input tax credit available to the sector. While this reduces compliance hurdles for the smaller companies, it does put an additional burden on the operating costs. Not only that, it also ups the capital outflow on new projects by almost 20 per cent.

 

Anurag Katriar, President of NRAI, and CEO & Executive Director, deGustibus Hospitality, said, “The current rate of 5 per cent 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”.

“Therefore, propose a multi-layered structure which will not increase compliance process for smaller and single-owner and single-restaurant companies but will give significant relief to the larger organised players,” it said.

 

NRAI explained that ideally, companies with annual turnover of less than ₹40 lakh should be fully exempted from GST. One per cent GST till ₹1.50 crore annual turnover, and 12 per cent GST for companies with annual turnover of ₹7.50 crore.

The F&B industry is valued at ₹4,23,865 crore. NRAI represents over five lakh restaurants. “The restaurant industry has perhaps seen one of the highest rates of mortality during the pandemic and is gasping for some fresh oxygen. With almost 30 per cent of restaurants shut down and balance operating at a much-reduced capacity, I reckon that almost 40 per cent of the 7.30 million jobs, i.e., approximately three million jobs, have already (been) extinguished,” said Katriar.

 

NRAI reckons that a chief reason for this is the lack of financial resources in the hands of entrepreneurs in the sector. “We, therefore, request the Finance Minister to treat us as 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,” it said.

The apex restaurant body said that this will help businesses survive till consumption regains momentum, “hopefully by the third quarter of the next fiscal,” it explained.

Lastly, with e-commerce emerging as a very critical arm for the overall economic growth of the nation, NRAI is seeking a strong and equitable e-commerce policy in the food service sector.

 

“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 will help it grow exponentially,” it said.

NRAI has been at loggerheads with food-tech aggregators Zomato and Swiggy for the past two years now. One of its primary concerns is the lack of data sharing by the aggregators.

“Their unilateral decision-making on the 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 brands, riding on the restaurant data that they singularly own currently (are among their concerns),” it explained to the Finance Minister.

 

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Published on January 28, 2021
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