The food service industry could grow exponentially if the Centre accepts its demand to have a dual GST structure, adequate rules against deep discounting by online players and creation of a single-window clearance for licences, according to the National Restaurant Association of India (NRAI).
“The growth between FY16 and FY18 was not great. Since January 2019 again there is a slowdown and it is not robust. GST compliance issues are posing trouble. The coming up of new outlets too has slowed down because of this,” said Samir Kuckreja, past President and Trustee, NRAI. According to the Indian Food Services Report of 2019, India’s food service industry market size is a mere $61 billion in comparison to China’s $815 billion.
Why dual structure
NRAI recently wrote a letter to the Finance Ministry proposing a dual GST structure for the industry. Restaurants are now levied a 5 per cent GST, but they can’t claim the input tax credit. NRAI has sought dual rate of GST — 5 per cent without ITC and 12 per cent with ITC. According to their plea, the current GST rate of five per cent does not allow restaurants to claim an input tax credit (ITC) against taxes they paid on expenses such as rent and raw materials. Some 20,000 restaurants were closed last year due to GST compliance issues.
A large number of restaurateurs are in favour of the 12 per cent GST, instead of 5 per cent, according to Kukreja.
For online delivery of food, NRAI has raised the issue of deep discounting and data masking in the proposed e-commerce policy. “Data masking is a structural issue and the deep discounting is of capital dumping, and it is not sustainable. Once these companies stop raising funds, they will not be able to sustain it. On the other hand, the consumers will get used to heavy discounting of 30-50 per cent that they will stop ordering. It’s bad for the industry. In the short term, the consumers are loving it, however, we don’t know how sustainable it is in the future,” said Rahul Singh, President of NRAI,
Singh said there is a serious need for regulation by the government and at a pace that the digital industry is growing. There are a lot of things that were unclear from the perspective of the e-commerce industry and “I think we will soon see an e-commerce policy which will clearly define the Dos and Don’ts for the aggregator.”
Source- Business Line.