Input Tax Credit Relief Sought by Food Services Sector in Upcoming Budget

The National Restaurant Association of India (NRAI) has highlighted the issue of the absence of input tax credit (ITC) for the restaurant industry to the Union finance ministry. Currently, restaurant services attract a 5% GST without ITC. The industry is advocating for an optional structure allowing for the collection of ITC at a higher rate of 12%, alongside the existing structure.

“We don’t get GST input tax credit. We have written to the finance ministry. There is a budget coming up. For the next six months, we are meeting all the finance ministers across states and we are also meeting the finance minister of Bengal very soon. I am hopeful that the GST Rate Rationalisation Committee will look into this,” an industry expert stated.

“Without GST input tax credit, we are experiencing double taxation. For instance, when paying rent, we are charged 18% GST and then collect 5% GST from consumers, which we pay to the government,” the expert explained.

Restaurant operators emphasize this issue as main street rentals have increased across major cities, including Calcutta. The restaurant industry, valued at ₹5.69 lakh crore, contributes 1.9% to India’s GDP. The NRAI estimates this will grow to ₹7.76 lakh crore by 2028. The industry’s tax contribution was ₹33,809 crore in 2024, projected to reach ₹55,594 crore by 2028.

State Excise Concerns

NRAI members are set to meet Bengal excise officials to discuss various issues, including allowing restaurants and standalone outlets to serve liquor on dry days, high label registration fees, and increased duties on craft and draught beer.

“We are hopeful of a meeting with the excise department officials in August,” another industry expert mentioned.

“For this industry to thrive, it must include both food and beverage,” he added. Currently, liquor label registration fees vary nationally from ₹1,500 to ₹15,000, while in Calcutta, it stands at ₹50,000 per label per year. The association is seeking a reduction. Additionally, the duty on draught beer has surged from ₹12 to ₹200 over the past two years, prompting the association to request a review. While 5-star hotels are exempt from dry day rules, the association is calling for parity, allowing standalone bars to serve liquor on dry days.

The association also urges that all listed brands be available at Bevco warehouses to prevent stock shortages at the retail level.