Pre-Budget Quote 2025 by Amit Roy – Restaurateur and partner at Shilton Hospitality

Amit Roy

As a representative of the standalone restaurant sector, I urge the Indian government to address several pressing concerns in the upcoming budget to ensure the industry’s sustainable growth and equitable treatment under the Goods and Services Tax (GST) regime.

1. Input Tax Credit (ITC) Disparity:

Currently, standalone restaurants are ineligible for Input Tax Credit, unlike their counterparts in hotels. This discrepancy places standalone establishments at a competitive disadvantage, as they cannot offset the GST paid on inputs against their output tax liability.

For instance, while hotel-based restaurants charge 12–18% GST based on slabs and standalone restaurants charge 5% GST on services, only the former can claim ITC on expenses such as raw materials and rentals.

This policy not only hampers profitability but also discourages investment in the standalone restaurant sector. We recommend extending ITC benefits to standalone restaurants to create a level playing field and promote fair competition. 

2. High GST Rates on Essential Inputs:

Standalone restaurants are subject to an output GST rate of 5% without ITC benefits, yet they incur 18% GST on most inputs, including rentals, equipment, and raw materials. This inverted tax structure escalates operational costs and erodes profit margins.

For example, a restaurant paying 18% GST on kitchen equipment cannot offset this tax against the 5% GST collected from customers, leading to increased financial strain.

We propose rationalizing GST rates on essential inputs or allowing ITC on these expenses to alleviate the financial burden on standalone restaurants.

3. Complex GST Structure and Compliance Challenges:

The multiplicity of GST rates and the complexity of compliance procedures impose significant administrative burdens on small and medium-sized restaurants. The necessity to navigate varying tax slabs—for instance, 28% GST on items like cigarettes sold in bars without ITC benefits—complicates pricing strategies and demands specialized accounting expertise.

Non-compliance or delays in filing can attract penalties, further exacerbating operational challenges. Simplifying the GST structure and streamlining compliance requirements would reduce administrative overheads and enable restaurateurs to focus on business growth.

4. Disparities in GST Rates Across Similar Services:

The current GST framework imposes different rates on similar services, leading to confusion and operational difficulties. For example, while dining in a restaurant attracts 5% GST, delivery services are taxed at 18%, and catering services may fall under different slabs.

This inconsistency complicates billing processes and can deter customers due to higher prices on certain services. We advocate for the harmonization of GST rates across similar services within the food and beverage sector to ensure consistency and fairness.

5. Impact on Industry Growth Prospects:

The standalone restaurant industry holds significant potential, with projections to become a $30 billion sector by 2025. However, the current GST regime’s complexities and financial strains impede this growth trajectory.

Addressing the aforementioned issues would not only enhance profitability for existing establishments but also encourage new entrants, fostering a more vibrant and competitive market landscape.

We urge the government to consider these recommendations in the forthcoming budget to support the standalone restaurant industry’s growth and sustainability.

Implementing these changes will promote fairness, reduce operational burdens, and contribute to the broader economy by enabling this sector to thrive.

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