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Hindrance of Taxation and Real Estate over the Path of Transition in the Indian Food Services Industry: Report



The food services industry is undergoing some major transitions with the emergence of new themes, cuisines, and concepts. However, challenges such as high attrition, manpower quality, high taxation, and real estate costs hover around as roadblocks to the development of the industry.

The recently formularized annual Indian Food Services Report by the National Restaurant Association of India underwent a thorough analysis of the changes in the dynamics of the industry. According to the report, the country’s food services market in presently estimated to be over Rs. 3.09 Lakh Crore and is projected to reach about Rs. 5 Lakh Crore by the year 2021.

The report said,

Key trends merging in the space include stores at travel hubs such as railways, airports, and highways, virtual kitchen, food trucks, and ordering-inns.

The study concluded that the restaurant sector will contribute a total amount of Rs. 22,400 Crore in taxes and create about 5.8 million direct employments in the next year. However, the organized sector is still standing at a 33% holding of the entire market. Riyaaz Amlani, President at NRAI, attributed the limited contribution of the organized sector to over regulation and the complex maze of license and approvals, along with high tax brackets. He added,

It is about time that government recognizes the socio-economic impact of our industry and initiates immediate steps to unlock its true potential.

It is a known fact that the major portion of the food services industry dives into the unorganized sector primarily due to the complexity and tax burdening of the game. The mitosis of the unorganized sector into the organized sector holds vital significance with regards to the industry performing well at large, and therefore, contributing towards the development of a strong economy of the nation.

Data suggests the contribution of the restaurant industry reaching close to 2.1% of the nation’s GDP by the year 2021. While releasing the report, Amitabh Kant, CEO at Niti Aayog, clarified the country’s exponential growth and consumption in terms of experimentation with concepts and cuisines and the frequency of eating out to be the major reasons behind the services sector’s humungous fillip. According to him, there is a new trend in the air within the Indian society that has led to the meteoric rise in the demand for food services. And as supply goes up, the entire that can be potentially captured is enormous. He added that it is a good time to venture into the food services industry while holding innovation and USP as the major differentiators contributing towards success.

The report suggested that the restaurant sector is the third largest sector among the India’s service sectors. This serves as a significant determinant in driving investments which further grows the market at large. In the upcoming years, due to the shift towards food services, the entire food sector may benefit from a higher costumer involvement and innovation attached with higher levels of competition.

Rahul Singh, Secretary at NRAI, recommended an early implementation of GST for the betterment of the industry. He further added that liquor must be included in the uniform single tax structure. With the arrival of GST there is bound to be certain changes, however, Rahul suggested that after the short term instability GST shall hail as a healthier approach for continued development of the Indian food services sector.

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