The price of alcoholic beverages in bars, lounges, clubs, discotheques, and cafes in Maharashtra is set to rise slightly. The state government has raised the Value Added Tax (VAT) for permit room liquor service by 5 percent, bringing the total VAT to 10 percent. This change was announced through a Government Resolution (GR) issued on Friday. Notably, there will be no increase in VAT for liquor services offered by star hotels, as they already operate at a higher VAT rate of 20 percent.

Hoteliers have expressed concerns over the recent government decision to raise excise license fees, which has already placed an additional burden, ultimately leading to higher liquor prices for consumers. They argue that in a landscape where states are striving to attract more revenue and tourists, such a move will disrupt their existing policies. It’s worth noting that this increase will not impact liquor sales over the counter at wine shops.

“The increase is quite surprising as the same in the backdrop of the increase in the yearly excise fees will mean that prices in restaurants, bars will go up. We are in the age where states are competing with each realising the power of tourism in driving economies resulting in reduction of excise duties. Goa, Chandigarh and Haryana are few such examples,” said Pradeep Shetty, president of hotels and restaurants of western india (HRAWI) which has thousands of high end restaurants and hotels as its members.

Sukesh shetty, president of AHAR, an association of over 15000 premium hotels, bars and restaurants across MMR, said “The hike is not fair on restaurants as there is a clear discrimination on wineshop sales and on-the-premise-consumption. This will definitely affect the sales in our industry thereby directly affecting the employment, compared to retail sales. Restaurant industry employs 6 to 8 times more people per outlet than the retail industry.”

According to insiders from the industry, the increase in VAT on liquor consumed within bars is expected to prompt customers to seek more affordable alternatives, such as off-site consumption in places like building terraces, parks, beaches, parked vehicles, or street corners. This shift could potentially pose law and order challenges for the state administration. It’s worth noting that the state has recently proposed allowing permit rooms to maintain stock for retail sales of liquor bottles or over-the-counter sales, a move seen as advantageous for bars, according to industry sources.