Government Must Reintroduce Input Tax Credit To Boost Food Services Sector

Budget 2021: Different macro-economic intervention is needed now for the foodservice sector

Budget 2021: The foodservice industry is one of the largest consumers of agricultural produce and with the new farm bill introduced, it is important to restore input tax credit on food sales as an added incentive for regularising trade in agricultural commodities. ”It will enable moving away from a cash-based economy that lent itself to malpractices, both in tax governance and reporting”, said Mr. Sanjay Kumar, CEO, and MD, Elior India. The consequences of the removal of the input tax credit have severely hit the food services sector as the margins were wiped out and the cash trade for the agricultural commodity caused troubles. Macro-economic intervention that is needed now, has to be distinctively different from the one that has been seen in the last decade, according to Mr. Sanjay Kumar.

The food services sector is one of the largest employers of semi-skilled and partially skilled labour. The removal of input tax credit and the economic challenges posed due to the pandemic have resulted in huge unemployment rates in the sector, especially for those people who receive wages that are marginally above those of the minimum wage category.

The government must re-introduce the input tax credit for food sales so that it helps in streamlining the entire agriculture commodities supply chain. Along with this, the industry seeks support to reabsorb the employees who have lost their jobs and moved to their hometowns as a consequence of the pandemic.


The foodservice sector needs a complete overhaul on three main parameters. They are as follows:

  • Restoration of the input tax credit
  • Implementation of stricter food safety norms by making the FSSAI a regulatory body
  • Enhancing the flow of formal credit

”One of the key drivers for the growth of the hospitality sector and particularly the foodservice sector is the need to enhance margins which are being compressed. The consequence of low margins business that it lends itself to malpractices, both in terms of production as well as regulatory compliance. We are hopeful that the government will now reduce the complexity of the regulatory governance of the foodservice industry so that it becomes more attractive for players to be compliant and follow established protocols of safety, particularly in the post-pandemic world,” added Mr. Sanjay Kumar.

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