Budget 2024: Food business professionals, owners want change in GST framework, hope for more provisions for women

The announcement of India's Interim Budget 2024 day is almost here and with that buzz around what will be prioritised this year is at its all time high. Even as different industries have a lot of expectations, food business professionals feel they need to be heard, especially in a post-pandemic world, where nothing is like it used to be ever before as they were among the worst hit. "The restaurant industry is a vital contributor to the national economy, generating over 7.20 million direct- jobs and boasting an annual turnover of around Rs 4.23 lakh crore. Despite being one of the sectors hit hardest by the pandemic, the industry has displayed resilience and is on a steady path to recovery," says Pranav Rungta, co-founder and director of Nksha restaurant, which opened less than a year ago in Churchgate; he is also vice president of National Restaurant Association of India (NRAI) Mumbai.

More for food businesses
Every year since 2019, the budget has been presented on February 1 by India's union finance minister Nirmala Sitharaman, and this year will be no different. As always, the common man and people across all industries will be looking forward to seeing the allocations made in banking, business, transport and food before the new budget is introduced later this year. With the restaurant industry in the food business contributing to a major chunk of the economy, like Rungta highlights, he and others from the industry hope there is more attention given to food businesses. "I would like to emphasise the need for policy and budgetary support in the upcoming budget to propel the sector and accelerate growth."

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He further lists out, "The key areas of focus include the restoration of the GST Input Tax Credit, reinstating the Service Export from India Scheme, establishing a dedicated Food Services Ministry, according to industry status, reducing GST on eco-friendly materials, addressing GST on commercial rentals, rationalising licences and NOCs, ensuring equitable e-commerce policies, extending operating hours, implementing targeted subsidy schemes for SMEs, and introducing an employee welfare plan. These measures will not only boost the overall size of the industry but also generate significant employment opportunities, contributing to the country's economic growth."

Rungta talking about the Restoration of GST Input Tax Credit (ITC), explains, "The industry, uniquely subjected to a 5 per cent GST without Input Tax Credit (ITC) to prevent cascading taxation, faces challenges. The absence of ITC significantly diminishes operating margins and inflates capital budgets for new projects, hindering expansion plans and impacting sector growth." To address this, Rungta proposes restoring ITC for restaurants, alongside a GST rate increase to 12 per cent from the current 5 per cent. "Acknowledging potential compliance burdens for smaller businesses, a tiered approach based on revenue slabs is ideal. Restaurants below a specified revenue threshold can retain the current GST provisions, while the organised sector with higher revenues and CapEx (Capital Expenditure) outlay may transition to the proposed GST regime."

As far as Reinstating Service Export from India Scheme (SEIS) is concerned, he further explains, "The industry contributes significantly to the country's foreign exchange through forex-denominated cards." He suggests the reinstatement of the recently discontinued SEIS scheme with a duty credit of 10 per cent for restaurant entities based on their forex earnings to enhance industry growth.

Last but not the least, the food services industry, due to its substantial economic contribution, deserves industry status. "This designation would yield numerous advantages, such as access to easier finances, special schemes, subsidies, and expedited clearance processes through Central or State industrial policies, fostering both enterprise and entrepreneurship," he adds.

Encouraging women entrepreneurship
Just like Rungta, even Aditi Handa, chef and co-founder of The Baker's Dozen, believes a lot more could be done when implementing GST. "As an entrepreneur, one of the challenges that I face is high marketing costs and excessive discounting. Companies like ours, driven by product quality, struggle to maintain healthy profit margins. To address this, implementing a minimum GST rate for all industry products can make goods more affordable for end-use customers without solely relying on heavy discounts. This approach supports brands in selling more while offering value, fostering fair competition and sustainable business practices," she explains.

Beyond GST, Handa highlights another aspect, which she thinks is absolutely necessary today. She hopes Budget 2024 implements decisions that actively support women entrepreneurship. Since a successful woman contributes significantly to family pride and national success, she says, "The budget should encourage women-led businesses by creating an environment with equal opportunities, addressing funding and mentorship gaps. Tailored policies, financial incentives, and skill enhancement initiatives can empower women entrepreneurs across all scales." The Mumbai-based female chef and businesswoman says it has the potential to transform women in business by fostering inclusivity and empowering women entrepreneurs can drive economic growth and social progress simultaneously.

GST, VAT and woes
It is no different for Manisha Shetty, who is the founder of Navi Mumbai-based restaurant Shades of Spices, as she not only breaks down the burden of cost but also the location that often has many challenges. She explains, "The hospitality industry has seen a few turbulent years. After Covid, we saw an increase in demand and footfall but at the same time, people are still price sensitive in a market like Navi Mumbai."

The fact that food costs have been increasing rapidly and have also become more volatile doesn't help either. "Early on, it was easy to achieve 27-28 per cent food costing. However,now it has gone up by 4-5 per cent, which is a huge hit for the industry." She blames it on the different statutory changes that have come in, which have not been in the industry's favour. "The imposition of GST on rental of commercial space has become an added cost for us. Furthermore, there was a recent revision of VAT on liquor sale in bars and restaurants to 10 per cent in Maharashtra. This is not applicable to liquor shops. It has become an added burden on the end consumers who have responded by cutting down their spends which in turn affects our bottom line," she further explains.

It is not only the GST and VAT but also ever-increasing and upward revision in costs of electricity, fuel, gas, salaries. "All of which is an added burden because we are not able to proportionally increase prices," she shares. It hurts even more for Shetty because she says there have been subsidies and special schemes for many industries including manufacturing and agriculture. However, there are very few schemes focused on the hospitality industry. She reminds, "Even during Covid, there were no relief measures for the industry despite being one of the worst-hit industries."

Suggesting solutions, she says, "Subsidies on purchase of food produce will largely help the industry. If food costs are in control, the industry will boom resulting in more employment and consumption. The taxation and licences are far too many for the industry, so some consideration on that front would be a boon." Iterating Handa's voice about more women in the industry, the Mumbaikar says women-run establishments in the industry should be encouraged. "Furthermore, employment of women is still very restricted in the industry when we look at it from a macroscopic perspective. It would be refreshing to see any such initiatives being encouraged."

So, what does Shetty expect from Budget 2024? "The hospitality industry contributes to a major percentage of the GDP and is growing rapidly at a rate of more than 5 per cent. However, for such a major stakeholder the provisions in the budget are far too less." The Mumbai restaurant business woman believes the industry on the whole hopes to see more support from the government. "With a slight push forward, the industry can generate huge revenues, employment and contribute largely to the economy. The expectation is to be included in more state and centre-run schemes. We hope to see more relaxations in rules and reduced red tape that could lead to ease of doing business.," she hopes.

Essential training and need for tax framework
Elsewhere in Bengaluru, Gaurav Sinha, hotel manager at JW Marriott Hotel Bengaluru, makes another observation. He says, "It is evident that untrained employees, lacking the necessary skills, take time to yield the right revenue." This, he says, is also one of the major challenges, as that may often affect daily operations for a five-star property. He adds, "We face a major challenge of sourcing highly trained personnel, all while contending with an increasingly competitive market. Additionally, the ongoing struggle to recruit and retain capable staff members presents a significant hurdle to our organisational goals."

It's not only the tax framework but also promotion of domestic tourism that needs a boost, according to him.

He further adds, "In light of Prime Minister Narendra Modi's advocacy of the 'Wed In India' initiative, there arises a need to formulate economic policies that incentivise the hosting of large-scale weddings within the country." Such policies, Sinha says, have the potential to bolster the hospitality sector and contribute positively to the national economy.

Furthermore, the prevailing higher rates of taxation on hotel accommodations and alcoholic beverages pose additional hurdles. By reducing these taxes, the Bengaluru-based manager says more individuals would be inclined to spend on hospitality services, thus stimulating economic activity within the industry.

While he hopes that will improve with the help of budget allocations for training staff, Sinha says Budget 2024 needs to focus on a tax framework that is conducive to the industry's growth. "Coupled with strategic incentives for eco-friendly initiatives, it will undoubtedly bolster the resilience and long-term sustainability of the hospitality sector," he concludes.