NRAI Urges Govt Support to Boost India's Restaurant Industry in Union Budget 2025-26

The National Restaurant Association of India (NRAI) has appealed to FM Nirmala Sitharaman to include targeted reforms and incentives for the restaurant sector in the Union Budget 2025-26. Representing over 500,000 restaurants nationwide, NRAI highlighted the industry's pivotal role in India's economy, from generating employment and driving consumption to contributing to tax revenues and supporting allied industries.

Key Contributions of the Restaurant Industry

• Employs over 8.5 million Indians directly.
• Annual turnover of approximately Rs 5.69 lakh crore, making it the third-largest contributor in the services sector after retail and insurance.
• A significant driver of consumption and tourism, positively impacting multiple industries.

However, the NRAI emphasized that the sector's growth potential is hindered by various challenges and sought urgent government intervention to unlock its full capabilities.

Recommendations by NRAI for Budget 2025-26

1. Restoration of GST Input Tax Credit (ITC): Introduce a new GST slab between 12% and 18% with ITC benefits for restaurants outside hotels with room tariffs above Rs 7,500, in addition to the existing 5% slab without ITC.
2. Review of GST on Commercial Leases via RCM: Exclude restaurants from Notification No. 09/2024, which applies GST on commercial leases via reverse charge mechanism, as it imposes inflationary pressures on MSMEs that cannot claim ITC.
3. Reinstatement of SEIS Scheme: Reinstate the Service Export from India Scheme (SEIS) with a duty credit of 5% on foreign exchange earnings by restaurant entities.
4. Reduction of GST on Eco-Friendly Packaging: Reduce GST on bagasse (eco-friendly packaging) from 12% to 5%, aligning it with plastic rates, to encourage sustainable practices.
5. Lower GST on Revenue-Share Rentals: Recommend reducing GST on revenue-share commercial rentals from 18% to 5%.
6. Targeted Subsidies and Debt Financing for SMEs: Introduce subsidies for essential ingredients, utilities, and waste management, especially for small-town restaurants, and improve access to debt financing.
7. Grant of Industry Status: Recognize the restaurant sector's immense contribution to the economy by granting it industry status, paving the way for more structured reforms and investments.
8. Establishment of a Dedicated Ministry/Department: Advocate for a dedicated ministry or department for food services to fast-track reforms and growth initiatives.
9. Employee Welfare Plans: Develop innovative welfare programs funded by central and state governments to support employees during employment and post-retirement.
10. Equitable E-Commerce Policies: Implement fair regulations to create a level playing field for restaurants, delivery platforms, and consumers, curbing exploitative practices.
11. Simplified Licensing Framework: Propose a standardized, country-wide licensing policy covering food safety, hygiene, environment, human safety, and taxation.
12. Extended Operating Hours: Recommend allowing restaurants to operate 24x7, considering changing lifestyles and consumer demands.

Industry Insights and Outlook

NRAI President emphasized the sector's critical role in driving India's economic growth. He stated, "Despite being a key economic contributor, the food services industry faces structural challenges that limit its expansion. Timely reforms and balanced policies can unlock the sector's true potential, ensuring long-term growth and benefiting millions of stakeholders."

The NRAI is hopeful that the government will consider these suggestions in the Union Budget 2025-26 to catalyze the growth of the restaurant sector, enabling it to emerge as a robust driver of employment, consumption, and economic activity.