Dining out could become costlier by about 5% after customs duty on key ingredients and imported foods were increased, restaurant chains said.
While customs duty on olive, sesame and castor oils has gone up to 35% from 20%, the levy on miscellaneous food preparations is now 50% compared with 30% previously, as announced in the new Budget.
“We import 30-35% of ingredients and especially rely on imported ingredients for our Japanese and Thai cuisine,” said Saurabh Khanijo, managing director of the Kylin chain of restaurants. “Even if we absorb the customs duty hike, ultimately, it’s the consumer who will bear the brunt of higher prices and industry can’t do much about it.”
The increase in customs duty follows the scrapping of input tax credit when the Goods & Services Tax on restaurants was slashed to 5% from 18% starting November 15. The removal of input tax credit directly impacts profit margins by about 10%, restaurant operators said.
“We import almost our entire range of sauces from Italy and the hike in customs duty has a significant cost impact on our profitability. Even if we decide to source from India, the challenge will be to match the same quality,” said Deepinder Batth, COO at the Bharti Family Office-run Gourmet Investments, which operates UK chain PizzaExpress.
“While we understand the objective is to promote Indian supplies, it puts pressure on profitability.”