GST regime derails Mainland China's expansion plans; affects profitability

GST affected SRL's profitability by 12%, limiting its scope for expansion across geographies on account of lower cash availability

The expansion plans of Speciality Restaurants Ltd (SRL), which owns brands like Mainland China, Oh! Calcutta, and Sigree Global Grill, have been hit hard under the goods and services tax (GST) regime.

Anjan Chatterjee, founder and managing director, SRL, said while restaurateurs could claim input tax credit under the previous value-added tax (VAT) system, that was not the case now. 

The new indirect tax system, he added, had affected SRL’s profitability by 12 per cent, limiting its scope for expansion across geographies on account of lower cash availability.

During the first three quarters of the current financial year, the company posted a net income of Rs 2.24 billion, a 7.44 per cent decline from the corresponding period last year. 

The loss also almost doubled to Rs 237.3 million, from Rs 118.8 million.

“This is the only industry where there is no input tax credit, while the GST meant input tax credit. The GST is the worst thing to have happened to this sector,” Chatterjee said, adding the company had made a conscious decision to fund any further capital expenditure from internal accruals and not raise any debt.

Chatterjee feels the extension of the firm’s most popular brand, Mainland China, which accounts for 50 per cent of its turnover, is needed for future growth of the company.

“The expansion of the company will be a combination of brand extension as well as launch of new brands, and all will be piloted in Kolkata,” he said.