Liquor in Maharashtra will now cost more after state finance minister Sudhir Mungantiwar on Saturday announced a 2.85% hike in Value Added Tax (VAT) on it.
The announcement during the presentation of the state budget for 2017-18 has angered hoteliers who said the move would impact their business, which is already reeling from a slowdown.
They also fear a further hike in tax on liquor with the introduction of the Goods and Services Tax (GST) in July, which aims to stitch together a common national market and abolish region-specific levies.
The VAT hike means that a bottle of whiskey that costs Rs1,000 will now cost Rs1,030, while a bottle of vodka costing Rs1,100 will be priced at Rs1,133. The price of a beer bottle will rise from Rs200 to Rs206. If you are drinking in a restaurant or permit room, you will probably end up paying more as you are mostly charged per peg.
Mungantiwar said the hike in the notified VAT rate from 23.08 % to 25.93 % is on foreign liquor, Indian-made foreign liquor and country liquor.
Flaying the decision, Dilip Datwani, President, Hotels and Restaurant Association of Western India (HRWAI) calls it adding salt to the wound.
“There are many restaurants in the city running their businesses at very low margins owing to high taxes. This move will create a negative sentiment among the patrons,” said Datwani. “The government is only making drinking liquor unaffordable to the people,” he added.
Datwani also questioned the logic of the hike when the GST would be implemented this year and the tax slabs would again be changed.
Similarly, the Indian Hotels and Restaurants Association (AHAR), the apex body of the hoteliers said the hike will hurt the sector. “We are already facing a massive slowdown with hardly any profits to boast of and this hike will worsen things further,” rued Adarsh Shetty, President, AHAR.
In the past few years, hotels and restaurants had been going through a rough phase owing to high license fees and labour issues. Many had to shut shop as they were unable to cope with the rising prices.
According to a source,close to 100 hotels are closing down annually. The hoteliers also point out that they have to competing with unlicenced food hawkers who pay no taxes.The high rents in Mumbai has also made it virtually impossible to open hotels on lease, the source said
According to another source, fewer migrants in the city and who had previously dominated hotel labour, has affected business.
The licence fee for a permit room is exorbitantly high at Rs6 lakh per annum.
What else is hurting the hotel sector?
The licence fee for permit rooms is exorbitantly high at Rs6 lakh per annum
Similarly, the licence fee for a wine shop is Rs11 lakh per annum.
Migration from many states has stopped as these states are working hard towards creating jobs for the locals
In addition, the pay structure has also increased thus affecting profit margins.
Apart from licence fees, the hotels also need to pay various taxes to the BMC and also a service tax to the Central Government.
The raw materials have also increased multifold
The 2.85% hike in VAT anger hoteliers who fear a further tax hike with the rollout of GST in July