Maharashtra announces 5% VAT hike on liquor services in bars and hotels

The tax rate increase won't affect over-the-counter sales at wine shops (Representative Image)

The cost of liquor served at bars, lounges, clubs, discotheques, or cafes in Maharashtra is set to increase from November 1, according to a report. The state government has raised the Value Added Tax (VAT) by 5% for liquor service in permit rooms.

The tax rate increase won't affect over-the-counter sales at wine shops, the publication stated. An official government notification regarding this was issued on October 20, as per the report in Times of India.

Due to the tax hike, the overall VAT rate for liquor services in permit rooms will be 10 percent.

Reportedly, there won't be any tax rate increases for liquor services offered at star hotels. Currently, services at star hotels are subject to a 20 percent VAT rate.

Pradeep Shetty, the president of hotels and restaurants in Western India (HRAWI), noted that the tax hike, combined with the yearly increment in excise fees, will result in increased prices at restaurants and bars.

Pradeep Shetty was quoted as saying by the publication, "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, and bars will go up. We are in an age where states are competing with each realising the power of tourism in driving economies resulting in a reduction of excise duties. Goa, Chandigarh and Haryana are a few such examples.

As per the report, Sukesh Shetty, president of AHAR, an association representing more than 15,000 upscale hotels, bars, and restaurants in the Mumbai Metropolitan Region (MMR), said that this development will impact industry's sales and, as a result, will directly influence employment.