# Food and beverage processing and Hospitality and tourism Processed food and drink are a major purchased input of hotels and restaurants, about ₹22 of every ₹100 of their output, and food service is a growing sales channel for processors; GST changes in September 2025 cut taxes on both sides of the link. Source page: https://www.materialinsights.org/links/food-and-beverage-processing-and-hospitality-and-tourism/ [Food and beverage processing](https://www.materialinsights.org/industries/food_beverage/) (industry) and [Hospitality and tourism](https://www.materialinsights.org/industries/hospitality_tourism/) (industry): 4 relationships. ## How they are linked ### 1. Buys from *Physical flow · ₹22.4 per ₹100 · Hospitality and tourism buys from Food and beverage processing* Restaurants, hotel kitchens, caterers and bars buy processed foods, dairy, oils and drinks for almost everything they serve. - **₹22.4** of every ₹100 of Hospitality and tourism output, all rounds (India 2022) - **₹18.5** bought directly The reverse flow is small (₹0.9 per ₹100 of food processing output). Price indices move together over a year (correlation about 0.49 over 12 months, US PPI), with hospitality prices leading by about two months, so menu prices do not simply follow input costs. Sources: [OECD](https://www.oecd.org/en/data/datasets/input-output-tables.html); [Material Insights (World Bank, FRED, IMF data)](https://www.materialinsights.org/industries/food_beverage/price-links/) ### 2. Industry input *Physical flow · Criticality 3 of 5 · Food and beverage processing to Hospitality and tourism* Three enterprise types in hospitality depend on processed food and drink, led by hotel brands whose restaurants and banquets earn a large part of revenue. - **42.3%** share of Indian hotel revenue from food, beverage and banquets, FY2017-18 survey Food is rated 3 of 5 rather than higher because hotels and restaurants can switch suppliers and brands easily; the risk is cost, not supply. In the other direction, restaurant chains and caterers are a sales channel for processors, rated 2 of 5. Enterprise types that depend on it: - Restaurant chains and caterers: food service channel (criticality 2 of 5) Sources: [Material Insights](https://www.materialinsights.org/industries/hospitality_tourism/); [Material Insights](https://www.materialinsights.org/industries/food_beverage/); [Hospitality Net](https://www.hospitalitynet.org/news/4092051/india-hotel-survey-reveals-key-findings-regarding-performance-opportunities-profitability) ### 3. Food-service channel *Transition · Rising · Eating out drives processed food sales* As more meals are eaten out or ordered in, more of what processors sell goes through restaurants and caterers rather than shops. - **₹5.69 lakh crore** India food services market, FY24 - **₹7.76 lakh crore** projected by FY28, growth of about 8.1% a year Growth of the food-service market raises demand for bulk and specialised products such as sauces, frozen items and dairy in catering packs. The channel is cyclical, because it depends on travel, tourism and eating out. Sources: [IndiaRetailing](https://www.indiaretailing.com/2024/07/10/food-services-sector-set-to-reach-rs-7-76-lakh-crore) ### 4. GST on food and rooms *Policy · High in India · GST rates on inputs and services moved together in 2025* Standalone restaurants pay 5% GST without input tax credit, so the GST on the food they buy is a cost they cannot recover; rates on both inputs and services therefore set their margins. - **12% to 5%** GST on butter, ghee, cheese and paneer from 22 September 2025 - **12% to 5%** GST on hotel rooms up to ₹7,500 a night, now without input tax credit, from 22 September 2025 The September 2025 changes cut GST on many processed foods, chocolates (18% to 5%) and juices to 5%, lowering the tax embedded in restaurant inputs. Mid-priced hotels moved to 5% without input credit, which lowers room prices but means GST on their food and other inputs becomes a cost. Sources: [Djubo](https://djubo.com/blog/gst-reforms-2025-hotels-restaurants); [Business Today](https://www.businesstoday.in/personal-finance/tax/story/big-gst-cuts-from-sept-22-see-whats-cheaper-now-and-what-got-pricier-full-breakdown-inside-492411-2025-09-03) ## For investors ### Key learnings 1. Food and drink take about ₹22 of every ₹100 of hospitality output, so food inflation is the main input cost risk for restaurant and hotel margins. 2. Food service is a growing channel for processors, projected to rise from ₹5.69 to ₹7.76 lakh crore between FY24 and FY28. 3. The 2025 GST changes cut taxes on many food inputs, but operators without input tax credit keep paying GST on purchases as a cost. ### What to track - **CPI food and restaurant-meal inflation**: A widening gap shows whether restaurants pass on food costs (Monthly · MoSPI) - **Hotel occupancy and average room rates**: Stronger rates lift banquet and restaurant food demand (Monthly · industry trackers, hotel results) - **Food-service sales of listed processors**: Rising share shows the channel's weight in processor growth (Quarterly · company results) ## For policymakers ### Key learnings 1. Restaurants and hotels are large buyers of processed food, so food processing policy also affects the cost of tourism. 2. Without input tax credit, GST on food inputs stays in restaurant prices; the 2025 cuts on dairy and packaged foods ease that. 3. Food service is a channel worth about ₹5.69 lakh crore (FY24), so processor sales in it rise and fall with tourism and eating out. ### What to track - **GST Council rate changes on food and hospitality**: Shifts the tax burden between inputs and services (As issued · GST Council) - **Foreign and domestic tourist arrivals**: Leading signal for hotel and restaurant food demand (Monthly · Ministry of Tourism) - **Food processing output index**: Shows supply response to food-service demand (Monthly · IIP, MoSPI) ## India India's food services market was about ₹5.69 lakh crore in FY24, and GST changes from September 2025 cut rates on many processed foods and on mid-priced hotel rooms to 5%. ## Sources 1. [OECD Input-Output Tables 2025 edition, India 2022](https://www.oecd.org/en/data/datasets/input-output-tables.html), OECD 2. [Price correlation, Material Insights](https://www.materialinsights.org/industries/food_beverage/price-links/), Material Insights (World Bank, FRED, IMF data) 3. [Industry map: Hospitality and tourism](https://www.materialinsights.org/industries/hospitality_tourism/), Material Insights (2026) 4. [Industry map: Food and beverage processing](https://www.materialinsights.org/industries/food_beverage/), Material Insights (2026) 5. [India Hotel Survey Reveals Key Findings Regarding Performance, Opportunities, Profitability (FHRAI, STR, Horwath HTL)](https://www.hospitalitynet.org/news/4092051/india-hotel-survey-reveals-key-findings-regarding-performance-opportunities-profitability), Hospitality Net (2019) 6. [Food services sector set to reach Rs 7.76 lakh crore by FY28 (NRAI India Food Services Report 2024)](https://www.indiaretailing.com/2024/07/10/food-services-sector-set-to-reach-rs-7-76-lakh-crore), IndiaRetailing (2024) 7. [GST Reforms 2025: How the New Rates Impact Hotels, Restaurants and Guests](https://djubo.com/blog/gst-reforms-2025-hotels-restaurants), Djubo (2025) 8. [Big GST cuts from Sept 22: see what's cheaper now and what got pricier](https://www.businesstoday.in/personal-finance/tax/story/big-gst-cuts-from-sept-22-see-whats-cheaper-now-and-what-got-pricier-full-breakdown-inside-492411-2025-09-03), Business Today (2025)