How Reduction in GST is affecting Industry
How Reduction in GST is affecting Industry

Food Industry is one of the happening and fastest growing industries.  It is the highest employer in the segment between blue collar and white-collar people and the government collects around eleven thousand five hundred crore taxes from food and beverage sector only. Now that the Government has added one more flavour called GST to the industry and it depends if the play will turn out to be lip-smacking or a big no. People were not even fully recovered of GST regulations and then they hit one more shot.

India food service which is highly driven by the increasing interest of millennials in the sector that has seen lots of ups and down in the year 2017. Customers are more aware in upgrading their lifestyles, more people are joining corporate culture and there is an increase in disposable income. All these factors have contributed to the growth of food service sector in a big way. But, now GST has created other complications for both the foodies and brands. Here are few notches to trace the GST dish:

Hike in Menu Price: Hike in restaurant’s menu price became one of the foremost questions after reduction in GST. “The restaurants have welcomed the transition to a flat rate of 5 per cent GST on food. However, the withdrawal of the ITC is worrisome, as it could increase costs. It is up to the owners of the restaurant to cover the costs themselves or to pass it on to the customers by increasing the prices of the menu,” says Nilesh Shah, Director & Co- founder at Rancelab.

Create Opportunities for Brands: Players who wanted to enter this market see this as a positive sign. It is a never miss opportunity as government has opened doors for new brands and start-ups in the market. “Even after reducing GST, restaurants are still trying to understand the changes required in their current systems to accommodate the new compliance model. Food and beverage industry believes that change is the only thing constant but adapting any change requires time,” adds Ashish Bahukhandi, Founder at Dudleys, adding that regulation of GST and then changes in the same could question the stability.

 A Seesaw Biz: When there was demonetization, there was a very rough patch on the food and beverage industry. It took a lot for people to recapture the position in industry that again with the GST of 18 per cent. It was considered as a hit on consumers due to the drastic increase in restaurant menu price. “For customers’ visiting restaurants on a regular basis had become a luxury which was a reduction on the number of regular customers that restaurants had. Therefore, reduction in GST seems to be fancy and good but restaurants now are brainstorming on adjusting the same with their menu,” shares Priyadarshini Dey, Owner of The Palms Restaurant.

Attract more guests: People who ate three or four times a week reduced it once or twice a week, as meals became expensive due to the high rates of GST. With the decrease in the GST rate, people could return to their eating habits and the number of guests will increase.This has been extremely confusing for both consumers and business-owners who have not yet grasped the nuances of the GST system yet. Everyone is interpreting GST rates differently, in a ‘to-each-his-own’ manner, where for example, some shops continue to charge 5 per cent on products had at tables, on the premise that “only establishments with a large seating area are eligible to impose higher taxes and they do not have one.”

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