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NEW DELHI : Restaurants are seeking simplification in taxes, tax holidays or reduction in fees given to excise departments, among other things, from the government as they struggle amid the coronavirus pandemic. As per National Restaurant Association of India, the representative body of restaurants, the industry has seen its business halve to 2.0 trillion in FY21 from 4.23 trillion in FY20, with the pandemic having forced nearly 30% restaurants to shut down permanently.

In 2020, when the coronavirus pandemic first hit, the government offered collateral-free loans of 3 lakh crore to MSMEs in general to improve the working capital requirements, and restaurants.

These loans came with a one-year moratorium period, and could be repaid in four years.

But restaurateurs said they did not benefit from the move in any way. “Moratoriums don't work for us, instead, what we need is a tax holiday or a waiver wherein we get relief from paying our sales taxes for one year," said Ajit Shah, partner at White Panda Hospitality, which has three restaurants in Delhi, including Kiko Ba and Tera Vita.

For at least four years, the industry has been asking for clarity with respect to GST input credit. Simply put, when a restaurant buys a good or product for 100 to cook with, it pays direct GST on that product to the government. This GST amount ranges from 5-28% on the input purchased. It then subsequently charges 2.5% SGST and 2.5% GST on food sold to the customer. But it does not receive any input credit for the goods it purchased. Which, industry players said, is a competitive disadvantage as all other industries get this back. 

“We are the only industry in India that does not get input credits back. Last month we had a budget call with the finance minister but since the restaurant industry does not fall under any particular ministry, it loses out," said NRAI president Kabir Suri.

The F&B sector has been among the worst hit despite the fact it that it has been one of the fastest growing in the country and is one of the largest employment providers, said Dawn Thomas, co-founder of Bengaluru-based VRO Hospitality that runs Hangover and Mirage. “It is high time for the sector to come under a dedicated ministry," he added.

In FY22, quick-service restaurants (QSRs) and cloud kitchens have done well but fine-dine restaurants, pubs, bars and clubs have been hit, he said. Restaurants like his have taken a hit on the balance sheet because of the GST issue and other operational issues like curfews and lockdowns causing major business disruptions. “We as an industry need a tax holiday and do not benefit from moratoriums because eventually, we still have to pay off loans," Thomas said.

Gauri Devidayal, co-founder and director of Food Matters India, that runs restaurants like The Table and Mag St Bread Co, in Mumbai, said this was a capital-intensive industry with large investments required upfront before the business is up and running. "We are also charged an 18-28% GST on most things. We pay an excise fee up front at the beginning of the year. It takes up to a year for restaurants to open their businesses and this can become a huge burden," she said.

The industry’s major ask is that the government should consider allowing restaurants the choice of taking input credit on GST, she said.

In the restaurant business, licencing is done by each state including the fee paid to various state excise departments for different kinds of liquor licences.

When the devastating second wave hit in April 2021, most restaurants had already paid a heavy license fee to state excise. This fee is collected upfront in March every year. In 2021, most restaurants were practically shut for two months. 

In a repeat of sorts, the Delhi government on Monday ordered restaurants to shut down, given the surge in daily covid cases, especially of the Omicron variant. Others have also put strict curbs, hurting business.

“The business runs on generating cash flow so when there are these blips like timing or capacity restrictions and the heavy licence fees, they affect us badly. The government just needs to be a little more lenient towards understanding that restaurants just aren't an indulgence but part of a social fabric and huge employment generators," Devidayal added.

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