The Hotel And Restaurant Association (Western India), also known as HRAWI, submitted a formal request to the Chief Minister of Maharashtra, Eknath Shinde, along with the Deputy Chief Minister and Finance Minister, Ajit Pawar, as well as Tourism Minister Girish Mahajan, and other relevant authorities. Their request sought a reversal of the recent 5 percent increase in Value Added Tax (VAT) on alcoholic beverages served in bars and restaurants throughout the state.
HRAWI, expressing both concern and astonishment regarding the unanticipated rise in VAT on alcoholic beverages, has emphasized that this substantial tax hike will detrimentally affect the hospitality sector, with a particular focus on restaurants and bars. Consequently, it is expected to have a ripple effect on the state’s tourism industry. The association has earnestly requested the government to reassess this decision, taking into account various concerns, including its potential impact on tourism, state revenues, the potential loss of business for hospitality establishments, and the heightened risk of bootlegging, among other issues.
Why HRAWI Urges VAT Reversal on Alcohol?
“Tourism is a vital contributor to the country’s economy, accounting for approximately 9 percent of the GDP and employing over 12 percent of the workforce. The affordability of liquor is crucial in the tourism sector.
Many States, including Goa, Haryana and Chandigarh, recognizing this fact, have reduced duties or levies on liquor to drive sales and boost tourism. The increase in VAT in our State is in stark contradiction to this, and will adversely affect both domestic and international tourism.
Affordability is key for tourists, and this decision hampers the initiatives taken to attract visitors. We urge the Government to reconsider the decision to increase the VAT, keeping the larger picture of our economy in mind,” said Pradeep Shetty, president, HRAWI.
During the post-pandemic era, there has been a notable upswing in domestic travel, underscoring the importance of maintaining affordable liquor prices as a means to draw in customers. HRAWI has emphasized that reduced prices not only bolster state revenues but also serve as a compelling incentive for domestic travelers to opt for Maharashtra as their preferred destination.
The association has underscored that elevated prices are likely to result in a downturn in restaurant business and impact those holding FL 3 licenses. Consumers may opt to avoid bars and permit rooms due to successive price hikes, inadvertently giving rise to illicit activities such as bootlegging.
“This is the second increase in prices, the earlier one being on account of an increase in excise license fees by 10 per cent. An increase in yearly excise fees followed by the doubling of VAT on liquor is likely to have a negative effect on businesses. On the other hand, reasonable liquor prices encourage spending, boost revenues and enhance the overall appeal of our State as a tourism destination. The hospitality industry is just about recovering from the pandemic’s blow. Further price hikes will dampen the spirit of business owners and may lead to undesirable outcomes, such as increased illegal activities. We appeal to the Government to consider the long-term consequences of such decisions,” said Chetan Mehta, vice president, HRAWI.
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HRAWI has additionally highlighted that the government established a committee with the specific purpose of investigating the decrease in beer sales in the year 2020. The aim of this committee was to ascertain whether this decline could be attributed to an uptick in excise duty.
“The increase in VAT directly affects the livelihoods of thousands of license holders and their employees. We urge the Government to roll back this decision and work collaboratively with the industry to ensure sustainable growth and prosperity for all. We remain open to discussions with the Government and stakeholders to find a solution that supports both the State’s revenue goals and the hospitality industry,” concluded Shetty.
