Starting from November 1, liquor served in bars, lounges, and cafes in Maharashtra is set to become more expensive as the state government plans to increase the Value Added Tax (VAT) by 5 percent for permit room liquor services. This move, however, will not impact the prices for over-the-counter sales at wine shops.
A government resolution outlining the tax hike was issued on a recent Friday. Consequently, the total VAT rate on permit room liquors will now be 10 percent.
It's worth noting that liquor services in star hotels won't experience a tax increase as they already pay a higher VAT rate, currently set at 20 percent.
Discussing the implications of the VAT rate increase, hoteliers expressed concerns. They mentioned that the recent surge in license fees imposed by the government had already raised the cost of liquor for consumers, making the decision to further increase VAT surprising.
According to Pradeep Shetty, the president of the Hotels and Restaurants Association of Western India (HRAWI), the move comes at a time when many states are actively lowering excise duties to boost their tourism industry and drive economic growth. Some examples of this trend include Goa, Chandigarh, and Haryana.
Industry sources cited by TOI suggested that this VAT increase could steer customers toward more affordable alternatives like off-premise consumption, such as enjoying drinks on building terraces, in parks, on beaches, or in parked vehicles. Such a shift in consumer behavior could not only harm bars and restaurants economically but also pose potential challenges to law and order, particularly regarding issues like drinking and driving.
In addition to the VAT increase, the state government is reportedly considering a new excise policy that would link pricing to the alcohol content of beverages and allow the sale of bottled liquors in bars and permit rooms.
This news comes in the wake of a previous report about rising liquor prices in Gurugram due to shortages of popular brands in Delhi. The shortage was attributed to Delhi's controversial excise policy and the rejection of sale licenses for major liquor companies, which led to higher prices in Gurugram as customers sought out popular alcohol brands.
