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Maha budget: Liquor prices all set to increase as govt hikes VAT

The state government in its annual budget on Monday proposed to hike value added tax (VAT) on all alcoholic beverages by five percentage points
PUBLISHED ON MAR 09, 2021 01:07 AM IST

The state government in its annual budget on Monday proposed to hike value added tax (VAT) on all alcoholic beverages by five percentage points.

Finance minister Ajit Pawar, in his speech, said, “VAT on the sale of liquor as prescribed in Schedule-B of Value Added Tax Act has increased from the existing 60% to 65%. Similarly, VAT on the sale of liquor as prescribed in Section 41(5) of the Value Added Tax Act has increased from the existing 35% to 40%.” This effectively means that manufacturers will have to pay 65% as VAT, up from the existing 60% if they take into account their manufacturing cost, or else they will need to pay 40%, which is based on MRP.

Hotel and restaurant owners have condemned the hike, saying it will only make things worse as their businesses are already reeling from the pandemic and any such hike would only drive away consumers. “We hardly have 40% of our pre-Covid-19 businesses now and the surge in cases from last month has reduced our earnings substantially. This hike will aggravate things further,” rued Shivanand Shetty, president, AHAR. He said in such cases, people tend to move to lower-quality brands.

The state also proposed to increase the state excise duty on liquor. Country liquor will be classified into two categories — branded and non-branded — and state excise duty will be levied at 220% of manufacturing cost or 187 per litre, whichever is higher, only on branded country liquor.

Wine shop owners said the hike was expected. “Since the Government is fighting Covid-19 virus and have very few avenues of revenue, we expected it would hike taxes on liquor,” said Arvind Miskin, president, Association of Progressive Retail Liquor Vendors, a body of wine-shop owners.

Savio D’sa, who is a hospitality consultant, said, “Maharashtra levies the highest taxes on liquor and this is impacting business negatively. People are now preferring to drink at home rather than in restaurants. This is also discouraging young entrepreneurs from setting up hotels,” said D’sa. Government needs to understand that lowering of taxes will spur businesses and garner more money for its exchequer,” said D’sa.

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