HRAWI Appeals for Rollback of Liquor VAT Hike, Cites State's Tourism Concerns

Industry Watch | October 26, 2023 | News


The Hotel And Restaurant Association (Western India) - HRAWI has submitted a representation to Eknath Shinde, Hon’ble Chief Minister; Ajit Pawar, Hon’ble Deputy Chief Minister and Finance Minister; Girish Mahajan, Hon’ble Tourism Minister; Jayshree Bhoj (IAS), Principal Secretary, Tourism, Government of Maharashtra (GoM);  and to Shaila A (IAS), Secretary (Reforms) Finance, Finance Department, GoM requesting rollback of the 5 per cent increase in VAT on liquor served at bars and restaurants across the State. 

Expressing concern and surprise at the unexpected increase in VAT on liquor, HRAWI has stated that the significant hike in taxes will have adverse effects on the hospitality industry, particularly on restaurants and bars and subsequently impact the State’s tourism sector too. The Association has urged the Government to reconsider the decision in light of the concerns including the impact on tourism and the State’s revenues, loss of business to hospitality establishments and the possibility of bootlegging, among others.

“Tourism is a vital contributor to the country's economy, accounting for approximately 9 per cent of the GDP and employing over 12 per cent 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.

HRAWI has stated that lower prices not only increase State revenues but also encourage domestic travellers to choose Maharashtra as a travel destination. It has pointed out that higher prices will inevitably lead to a decline in business for restaurants and FL 3 license holders. Consumers will refrain from patronizing bars and permit rooms due to the successive increases in prices. Moreover, this rise may inadvertently encourage illegal activities like 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.

HRAWI has also pointed out that the Government constituted a committee to look into the decline in beer sales in the year 2020. This was done to find out if the same was due to an increase 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,” concludes Shetty.

HRAWI has stated that the significant hike in taxes will have adverse effects on the hospitality industry, particularly on restaurants and bars and subsequently impact the State’s tourism sector too.

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