Restaurants' association urges GST reform, seeks higher rate and input tax credit restoration

Restaurants' body seeks GST reforms: The National Restaurant Association of India (NRAI) has petitioned the government for a strategic shift in the Goods and Services Tax (GST) structure in a bid to revitalise the restaurant industry post-pandemic. In a letter addressed to Finance Minister Nirmala Sitharaman, the association advocates for restoring input tax credit (ITC) to restaurants, proposing a higher GST rate of 12 per cent, as well as calling for an equitable e-commerce policy. The move is seen as pivotal for sector growth, aiming to provide a level playing field for all stakeholders.

Set of proposals to Finance Minister

The National Restaurant Association of India (NRAI) has presented a set of proposals to the Finance Minister ahead of the Union Budget. The industry body is urging the government to consider two significant changes – the restoration of input tax credit (ITC) to restaurants and an increase in the Goods and Services Tax (GST) rate from the existing 5 per cent to 12 per cent. The association emphasises that the lack of ITC, combined with the current GST rate, hampers the industry's expansion plans, affecting overall sector growth.

GST reform advocacy

The NRAI proposes a dual approach to GST reform. Firstly, it suggests restoring ITC to restaurants to eliminate the cascading effect of taxation and improve operating margins. Secondly, the association recommends an increase in the GST rate to 12 per cent, acknowledging that this might pose a compliance burden on smaller businesses. To address this concern, the NRAI proposes implementing the changes based on revenue slabs, allowing smaller establishments to continue under current provisions.

E-commerce policy and industry status

Apart from GST-related recommendations, the NRAI advocates for an equitable and fair e-commerce policy. Balancing convenience with fair competition is highlighted as crucial for the growth of the industry. Additionally, the association seeks "industry status" for the food services sector, emphasising the significant contribution it makes to the country's economy. This designation would potentially bring multiple benefits through central or state industrial policies.

Rationalisation of licenses and subsidy schemes

NRAI underscores the complexity and compliance burden imposed by the current licensing norms, urging the Finance Minister to rationalise licenses and no-objection certificates (NOCs). The industry body also proposes targeted subsidy schemes and access to debt financing for small and medium-sized enterprises (SMEs), particularly focusing on subsidies for essential ingredients, utilities, and waste management.

Extended working hours and GST reduction on eco-friendly materials

In a final set of recommendations, the NRAI requests longer working hours for the restaurant sector and a reduction in GST on eco-friendly materials used for packaging, such as bagasse. These measures aim to provide operational relief to struggling restaurants, especially in smaller towns and cities.

The NRAI emphasises that implementing these reforms will not only benefit businesses and consumers but will also contribute significantly to overall economic growth and employment opportunities. The proposals are seen as a strategic move to accelerate the post-pandemic recovery of the restaurant industry.

(With PTI inputs.)