The National Restaurant Association of India (NRAI) has written a letter to Finance Minister Nirmala Sitharaman seeking certain policy and budgetary support which will propel the Indian Restaurant Industry to an accelerated pace of growth.The restaurant industry is a significant contributor to the nation’s overall economy in many ways– from employment to tax revenues, driving consumption, promoting tourism, to being a buyer of goods and services from several other industries and sectors which are dependent on and are positively impacted by it.
Apart from contributing significantly to the direct and indirect tax revenues, the restaurant industry is also one of the highest employment creators in India, currently employing over 8.50 million Indians directly in the sector. With an annual turnover of approximately Rs 5.69 lakh crore, the restaurant industry is the third largest after retail and insurance in the services segment.
According to the NRAI India Food Services Report 2024, the industry is expected to reach Rs 7, 76,511 crore and grow at an 8.1 per cent compound annual growth rate (CAGR) by 2028, making it the third-largest food services market globally. The industry, which now accounts for 1.9 per cent of India's GDP and employs 8.5 million people, is predicted to produce more than 10.3 million jobs by 2028. Despite its vibrant growth trajectory, the sector faces several challenges, including rising input costs, denial of input tax credit, complex regulatory compliances, delivery dynamics and limited operating hours.
NRAI feels that the industry’s true growth potential can be unleashed through urgent assistance/stimulus provided by the government. NRAI is confident that not only will this boost the overall size of the sector but it will also generate a tremendous amount of employment opportunities in India.
The NRAI has proposed the introduction of a new GST slab between 12 per cent and 18 per cent with Input Tax Credit (ITC) for restaurants not located in hotels with room tariffs above Rs 7,500, in addition to the existing 5 per cent slab without ITC. This measure aims to provide flexibility and support to restaurant owners while ensuring fair taxation policies.
Furthermore, the association has urged the government to review Notification No. 09/2024, dated 8 October 2024, regarding GST on commercial leases through reverse charge mechanism (RCM). The current notification has caused inflationary pressure on smaller restaurants and MSME business owners, particularly those renting from unregistered dealers. Since the restaurant sector is not eligible for ITC, the NRAI has requested either a complete exclusion of the restaurant industry from the notification's applicability or a rollback to ease the financial burden on these businesses.
It has urged the government to reinstate the Service Export from India Scheme (SEIS) with a duty credit of 5 per cent of the forex earned by restaurant entities and to reduce GST on bagasse and other eco-friendly materials from the current 12 to 5 per cent to promote sustainable packaging. It also seeks a reduction of GST on commercial rentals (revenue share) from 18 to 5 per cent and targeted subsidy schemes to lower operational costs for struggling restaurants, especially in smaller towns.
The NRAI has called for granting industry status to the food services sector, establishing a dedicated food services ministry or department, and introducing innovative welfare plans for employees to ensure their well-being during and after employment.
Additionally, the NRAI emphasised the need for equitable and fair e-commerce policies to create a level-playing field, rationalization of licenses and NOCs through a simplified and standardised policy, and permission for longer operating hours, including 24x7 operations, to align with citizens' lifestyle trends. These measures, it argues, are essential for boosting the growth and sustainability of the restaurant sector while benefiting all stakeholders.
Sagar Daryani, NRAI President stated, “The food services industry is critical to India's economy, providing significant revenue to the government, employment, and consumption. Despite its potential, the sector faces challenges which restrict its growth and expansion. To address these challenges, timely support and reforms are required. Balanced and fair policies will not only unlock the industry's maximum potential but will also ensure long-term growth, benefiting millions of employees, consumers, and businesses while reinforcing its position as a key economic driver.”