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Investment 2017-02-02

Budget 2017: Heavy taxation, licensing to continue with no ease of doing biz in Restaurants

According to the NRAI India Food Services Report 2016, the total Food Services Market today stands at INR 3,09,110 crores which is about 1.6x the size of Railways.

By Deputy Features Editor
Budget 2017: Heavy taxation, licensing to continue with no ease of doing biz in Restaurants

Union Budget 2017 was one of the much awaited budgets for all sectors in India. Hospitality & Tourism which has contributed a lot in the development of Indian economy was ignored in the budget allocation.

"We had very high expectations from this year's Union Budget for tourism and hospitality. Based on the Government's vision for tourism and our hopes were to receive the much needed reduction in taxes which would come into effect in the GST roll-out later this year. Also we had hoped that the government would grant infrastructure status to hotels with a project cost of INR 25 crore as against the present INR 250 crore. But there has been no mention on any of the critical aspects for promoting tourism," says Dilip Datwani, President, Hotel and Restaurant Association of Western India (HRAWI).

In last one year with growth in the hospitality and food sector we have seen that this has pushed the continuous growth of the economy being a major contributor in the GDP. It also came up in a research done by Trip Advisor that food tourism would be on rise in 2017 and further, but this move has brought a deep concern for the industry leaders. "Hospitality as the backbone of Tourism is a big contributor to the GDP, being one of the biggest employer and also is one of the biggest generators of Foreign Exchange to the country. It is very disheartening to know that the Union Budget has completely ignored Tourism and Hospitality," concludes Datwani.

Commenting on the same, Riyaaz Amlani, President- NRAI shares “While we were looking at some incentives for the Restaurant Industry, there are no specific announcements made by the Finance Minister.” According to the NRAI India Food Services Report 2016, the total Food Services Market today stands at INR 3,09,110 crores which is about 1.6x the size of Railways and about 8x the size of the Hotel industry; employs a total of 5.8 million people; and contributes a whopping INR 22,400 crores by way of taxes to the Indian economy. As per the NSDC, restaurants contribute the maximum manpower requirement within the hospitality sector. “For now, the restaurant industry will continue to suffer under heavy taxations and licensing with no on ground change in Ease of Doing Business,” adds Amlani.

However, the budget has given a 5 per cent reduction in tax slab of the middle class section who comes under Rs 2.5 to 5 lakh bracket which will help increase disposable income of the section. "For the hospitality industry the only take-away from the Union Budget 2017 is the 5 per cent tax reduction which is applicable for all MSMEs. Other than that, the Government has announced plans to establish five tourism zones in the next Financial Year with Special Purpose Vehicles (SPV) set-up. There is no clarity on what or where the Government plans to execute this project. Despite acknowledging Tourism's potential in creating a multiplier effect for the economy, the Finance Minister has not really marked out anything significant for its promotion," Points Kamlesh Barot, past President, HRAWI.

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