VAT on Liquor Service Increased: Alcoholic drinks to get more expensive in bars, clubs, and cafes etc. from Nov 1

The nightlife in Maharashtra is about to get a tad more expensive as VAT on liquor service increased by 5% by the state government. This revised VAT will be applicable to liquor served at bars, clubs, or cafes, confirming that the cost will witness a rise starting from November 1. The government has decided to increase the Value-added tax (VAT) by 5%, making it a total of 10% on the permit room liquor service.

Details of the Increase in VAT

• The VAT on liquor service increased by 5%, particularly in permit rooms, aligning the total tax to be 10%.
• This alteration in the VAT rate will not influence the prices of on-counter liquor sales.
• Notably, star hotels are exempt from this tax increment as they are already subjected to a 20% VAT.

Industry Insight: Reaction to the New VAT on Liquor Service

Hoteliers and industry experts have voiced their concerns over the new taxation policy. The recent rise in license fees and the newly announced VAT hike are expected to collectively increase the expense burden on customers. Pradeep Shetty, president of Hotels and Restaurants of Western India (HRAWI), expressed surprise at the increase, citing that such a move is contrary to the trend in states like Goa, Chandigarh, and Haryana, where there is a realization of tourism’s role in boosting economies, leading to a reduction in excise duties.

Consumer Behavior and Industry Impact

The VAT on liquor service increment is speculated to alter consumer behavior, prompting many to opt for less expensive, off-premise consumption options. This could range from choosing building terraces, parks, or beaches as spots for alcohol consumption. Such a change in consumer preference poses a significant challenge to the industry’s revenue and overall sales, having a direct impact on employment within the sector.

• Sukesh Shetty, president of Indian Hotel & Restaurant Association (AHAR), mentioned that this development is set to affect the industry’s sales and could potentially have a direct influence on employment rates.

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Looking Ahead: Additional Policy Considerations

Apart from the VAT on liquor service increase, the state government is also contemplating the introduction of new excise policies. These policies may allow the sale of bottled liquors in bars and permit rooms, intending to link prices with the alcohol content of beverages.

In conclusion, the increase in VAT on liquor service in Maharashtra signifies a notable shift in the state’s taxation policy, aimed at permit room liquor services, with implications set to reverberate through the industry and consumer behaviors from November 1.