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Why 2016 Hasn't Been a Good Year for Restaurants - Fooditter

Why 2016 Hasn’t Been a Good Year for Restaurants


On one hand, the technology is changing the face of food and restaurant industry. With the arrival of mobile devices on the dining table, social media, and online table reservations to unique payment methods, technology has invaded food and restaurant industry in a good way. And on the other hand, throughout 2016, the restaurant industry experienced a surge in sales that was paired with different reasons right from the increase in sales tax to latest currency ban of Rs 500 and Rs 1000 notes.

Not just customers, falling sales and a few of poorly grappling concepts have made investors too to run away from the restaurant industry. But, let’s see how and why 2016 hasn’t been a very good year for the restaurant industry in a detailed way.

Taxes & Charges May Increase Bill

Is it possible to pay for only the food that we consume? No, actually not possible. This is because of the different taxes and charges in the restaurant bill outnumber items that we order. Now, to this long list of taxes a new cess has been added from June 1st, 2016. It is called the Krishi Kalyan Cess and it is being levied at a rate of 0.5% in all service industries.

For instance, if your total check at a decent restaurant comes to 4,000 INR, you may end up paying nearly Rs. 1000 extra which comes under taxes and charges. Let’s see how.

Albeit every restaurant is free to custom any amount as a service charge, most restaurants charge 10% of total bill. So that means 10% of 4000 is 400. Next, comes service tax (14%) in which 40% of the item cost is counted as service cost and tax is customed on that so which means 40% of 14% (5.6%).

Then comes the Swachh Bharat Cess and Krishi Kalyan Cess. These are charged along with the service tax on all the taxable services at a rate of 0.5% for each of the cost of service. That means 40% of these, which comes to around 0.2% is charged on the bill amount. If we take the total service tax as 6% (5.6%+0.2%+0.2%), the number comes to 264 (6% of Rs. 4,400).
Another substantial tax is VAT (Value Added Tax). This varies from city to city. In Delhi, VAT on food is charged at 12.5% on 60% of the bill (12.5% of 2400) which is 300. The total cost of eating out comes to 4964. Which is a big amount for any middle-class person.


On November 8th, 2016 when PM Narendra Modi announced the currency ban of Rs. 500 & Rs. 1000 notes the public was almost struck by a storm. Due to serious cash crunch public have stopped going to places where they will have to spend cash. Whatever little money they have in hand are preserving for daily essentials.

For restaurants who had restaurant POS system didn’t get affected much but those who didn’t, felt deserted. Later, a few have adapted restaurant management system in order to overcome the issue.

Online Food Ordering Apps

Online food ordering apps have had a huge impact on restaurant sales. People are now able to order food anytime and anywhere with just a few clicks. Because of the convenience, time-effective and affordability people are showing more interest towards ordering food from an app than going to a restaurant.

Let’s hope the coming year 2017 brings a lot of luck for everyone especially for the restaurant industry.

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