Impact of GST on restaurant industry positive: Survey

Team Udayavani, Feb 19, 2018, 4:23 PM IST

Mumbai: The restaurant industry in Mumbai and Bengaluru feels the impact of Goods and Services Tax (GST) has been largely positive, but lack of clarity on regulations remains a major hurdle, according to a survey.

More than 70 per cent of the restaurant owners in the two cities believed GST is a positive decision for the industry, while 68 per cent businesses felt it will ease compliance since it is backed by technology, said the survey by Grant Thornton India, a leading assurance, tax and advisory firm.

High rentals and difficulty in retaining experienced staff are key challenges faced by the restaurant industry in Mumbai and Bengaluru, said the survey titled ‘Bon Appetit Emerging trends, opportunities and challenges in Indian restaurant industry’.

Lack of clarity on regulations has also been mentioned as an area of concern, it added.

The Grant Thornton’s Bon Appetit survey was based on findings from 35 (Mumbai) and 29 (Bengaluru) owners and Key Managerial Personnel (KMPs).

Like GST, demonetisation has also affected the restaurant industry, the survey revealed.

The impact of demonetisation appeared to have been more in Bengaluru, where only one-third of the respondents said there is no impact, compared to Mumbai, where it was 60 per cent, it said.

This is also as cash is still a predominant mode of payment and accounts for 20-30 per cent of receipts in a restaurant, it said.

M-wallets have just started picking up and account for 4-5 per cent of the collections, it added.

“The Indian restaurant industry has evolved and grown significantly over the past two decades and continues to grow at a steady pace.

“This can be attributed to the changing demographics, increase in disposable incomes, urbanisation and growth of organised retail. The market is highly segmented on account of varying income levels and age bracket of the population,” said Grant Thornton India LLP Partner Dhanraj Bhagat.

The survey revealed that quality of food emerged as the key driver for growth of restaurants, followed by location and pricing.

For Mumbai respondents, having organic food is more important than concerns related to pricing and cuisine preference, while affordability was highlighted as the key emerging trend in consumer preferences in Bengaluru.

Meanwhile, the respondents said pan-India or regional expansion was the primary strategy for growth.

In Mumbai, respondents said global expansion and cuisine addition are two other crucial strategies for increasing footprint.

When it comes to funding these expansions, Mumbai respondents preferred private equity firms, whereas Bengaluru saw bank loans as the primary source, the survey added.