As of November 1, patrons of restaurants and bars in Maharashtra will need to dig deeper into their wallets for their favorite alcoholic beverages. The state government has announced a 5% hike in Value Added Tax (VAT) on liquors served in hotels, bars, lounges, and clubs, leading to a rise in their prices.
According to a notification from the finance department, the VAT rate for permit room liquor services has been doubled to 10%. This move is anticipated to have consequences for consumers and potentially affect law and order in the state. The increased cost of alcohol might prompt drinkers to explore more budget-friendly alternatives such as off-premise consumption, leading to an increase in people choosing to drink on building terraces, parks, beaches, or inside parked vehicles. This shift in consumer behavior could present challenges for the authorities. Additionally, the government is contemplating a new excise policy that would correlate alcohol pricing with beverage alcohol content and allow the sale of bottled liquors in bars and permit rooms. However, there is no information available about the timeline for implementing this policy.
While this decision is expected to reduce beer prices, its primary objective is to enhance government revenue. Liquor has long been a significant revenue source for the government. In the previous month, the GST department in Mumbai proposed an increase in the tax on liquor served in restaurants and hotels rated below 3 stars, suggesting a raise from 5% to 10-15%. Such a move could potentially boost annual revenue for the government by Rs 300 to Rs 600 crore. Alongside liquor, the department has also proposed increased taxation on gold and gold jewelry, as well as a uniform tax rate on fabric and readymade garments.
