Apex body of liquor manufacturers warns of severe impact of massive tax hike by the state govt

MUMBAI: The sudden three-fold rise in taxes and subsequent expected decline in IMFL (indian made foreign liquor such as whisky vodka rum gin) volumes may reduce demand for grain-neutral spirit (GNS), adversely affecting rural grain-supplying farmers.

Ancillary sectors like logistics, packaging, and bottling—largely comprising MSMEs—may also face significant disruptions too. The tourism and hospitality sectors, including bars and restaurants, are likely to experience reduced footfall, lower revenues, and possible layoffs, warned International Spirits and Wine Association of India (ISWAI), a leading forum of all major hard liquor manufacturers in the country. ISWAI members made a representation to the state government on Tuesday and said Maharashtra has the advantage of being the gateway of India for business travel and tourism. “An astounding 1.8 lakh foreign tourists visit the state, with domestic tourists exceeding 4.3 crore . This could be severely impacted with high prices in the state and travellers may bring in cheaper alternatives from other states,” an ISWAI delegation told the state government demanding immediate roll back of such a heavy tax rise.

ISWAI urged the state government to adopt a more gradual, calibrated approach to revenue augmentation in a phased manner instead of resorting to such a heavy rise in one go.

“Small & medium bars viability will be badly impacted (Maharashtra hospitality sector comprise of 20,000 bars, including 8000 in Mumbai) which could result in they pulling down shutters permanently. Over 60% of permit rooms and lounge bars with 50-100 seating capacity will not be able to function as they are already facing lower footfalls and higher investment in stocks impacting business viability immediately,” warned ISWAI CEO Sanjit Padhi who held a series of meetings with state leaders.“Such a tax bombing could eventually lead to loss of jobs and livelihood (industry directly employs over 4 lac individually, and around 18 lacs indirectly). In addition there is a heightened risk of unintended consequences, such as increased consumption of illicit liquor and cross-border smuggling from neighbouring states like Goa and Madhya Pradesh, leading to loss of revenue to the Govt of Maharashtra and increasing public health risk and possible hooch tragedies which happen in states where prices of alcohol are extremely high,” he added. Maharashtra’s AlcoBev industry, which contributes ₹23,290 (₹40086 Crores including VAT ) crore annually to the state’s exchequer, has seen a robust 11% CAGR in total revenues and a remarkable 35% CAGR in the premium segment between FY20 and FY24. “However, as a consequence of the Maharashtra government’s recent duty rates hiked from 300-400 % for the core category of IMFL, prices of IMFL products are set to rise by up to 50-60 %, with the price of a 180 ml bottle expected to increase by ₹70-100, a move that industry experts fear will have far-reaching economic and social consequences and could derail the momentum.

Government's plans to optimize revenue through this unprecedented hike and raise an additional ₹14,000+ crores which Industry experts believes will not be possible as volumes will shrink in the affected category by 30-40 % and with consumers down-trading to cheaper and lower quality products , the expected increase will not be more than ₹2000-2500 crores,” an ISWAI statement said.