Hotels, restaurants may go on token strike in Maha over tax hikes: AHAR

The hotel body says hikes in VAT, licence fees and excise duty have made it difficult for small businesses to survive and warns the moves may hurt tourism and state revenue

The Indian Hotels and Restaurants Association (AHAR) on Wednesday said its members might go on a token strike if the Maharashtra government does not provide relief to hotels and restaurants regarding hikes in value-added tax (VAT) on liquor, licence fees, and excise duty.

 

This comes after VAT on liquor was raised to 10 per cent from 5 per cent in 2023, followed by a 15 per cent hike in licence fees for the financial year 2025–26 (FY26). Small hotel owners now have to pay Rs 86,250 per month as licence fees to the state government, according to AHAR. Additionally, a 60 per cent hike in excise duty has made it difficult for small to medium hotels and restaurants to sustain their businesses. 

 

"It's a humble request to the Maharashtra government, honourable chief minister and honourable deputy chief minister, I request you to listen to us… All of Maharashtra is in agitation mode. Give us some relief in this (hike in tax). Otherwise, the next course of action is the token strike, which has not been declared yet,” said Sudhakar Shetty, president, AHAR. “We appeal to the government to engage with the industry and initiate urgent steps to roll back the tax hikes.”  In June, the Hotel and Restaurant Association (Western India) or HRAWI, had made a similar request by sending a representation to Ajit Pawar, deputy CM and finance and excise minister, to reconsider the excise duty hike and engage with stakeholders before implementing such a harsh measure. 

   

AHAR, started by a group of hoteliers to safeguard their interests in 1979, currently has over 19,000 members in Maharashtra. While the rise in VAT on liquor, licence fees and excise duty does not affect large hotel and restaurant chains in the state, it becomes a major issue for small-scale hotels and restaurants, which compete in a price-sensitive market, said two hotel executives on condition of anonymity. Many members of the association, especially restaurants with a 50 to 100 seat capacity, believe they may not be able to continue operating in the current environment. 

On the other hand, AHAR noted that these concerns might cause domestic and international tourists to go towards other states, resulting in a decline in footfalls, business activity, and ultimately lower state revenues. This comes at a time when the Prime Minister’s office, in collaboration with the World Bank, discussed and laid out a vision to make Mumbai as the top tourist destination in India.  

“It (financial pressure from the taxes) will become a tourism deterrent, with Maharashtra potentially losing ground to neighbouring states on pricing. Mumbai is a global city and Maharashtra will become arguably the most expensive state in the country for liquor. What we are staring at is not just revenue loss for the state but the erosion of jobs in hospitality businesses, safety and tourism," said Nirav Gandhi, senior vice president, HRAWI, corroborating with AHAR.

 

“With rising costs passed on to consumers, the affordability of services in the sector is now under threat, further reducing demand and deepening the crisis,” AHAR said in its statement.

 

Shetty and Gandhi both emphasised that these tax hikes might result in the rise of tax evasion and corruption as liquor from neighbouring states will make its way into the state through illegal channels.