Sudhakar Shetty, President of AHAR, stated, “The hospitality industry has been hit by a series of financial shocks in quick succession. The recent VAT hike from 5% to 10%, followed by a 15% increase in licence fees, and now a steep 60% jump in excise duty is nothing short of a tsunami of taxation. This triple burden will destabilize a sector that has only just begun to recover post-pandemic.”
Maharashtra currently houses over 19,000 licensed permit rooms and lounge bars, with new establishments increasing by nearly 8% annually. The sector directly employs more than 4 lakh individuals and supports over 48,000 ancillary vendors. AHAR estimates the total indirect employment generated by the industry at over 18 lakh individuals.
To assess the gravity of the situation, AHAR recently convened a meeting with 25 hotel and restaurant associations across the Mumbai Metropolitan Region and Maharashtra. “We speak in one voice: the government must initiate an immediate dialogue with our industry to find a rational and mutually acceptable resolution. Our survival is hanging by a thread,” Shetty emphasized.
While acknowledging the state’s revenue concerns, AHAR highlighted the likely fallout of this taxation model. “Rather than increasing state earnings, such hikes could push customers and business owners towards unregulated, illegal outlets. Many of these operate without licences, evade taxes, and are known to sell counterfeit liquor—particularly along highways. This endangers public health and undermines lawful businesses,” Shetty noted.
He warned that higher costs at licensed bars and lounges may drive patrons to drink in public spaces after purchasing alcohol from wine shops, thus contributing to public nuisance and law enforcement issues.
AHAR is appealing for an immediate rollback of VAT from 10% to 5% as a starting point to relieve the sector from over-taxation.
Vijay Shetty, Secretary of AHAR, added that the association was not consulted before these decisions were enforced. “AHAR has always been a stakeholder in policy consultations. The absence of dialogue in this case is deeply concerning and has caught the entire industry off guard.”
He further pointed out that 70% of hospitality business owners depend on bank loans. “A revenue drop of 30% or more will affect their repayment capacity, potentially increasing the number of non-performing assets (NPAs) in the banking sector. This is not just a hospitality crisis—it could become a financial stability issue.”
The long-term consequences could include shutdowns of small- and mid-sized establishments, discouragement of new entrepreneurs from entering the field, and overall stagnation in an industry that thrives on innovation and service.
The timing is particularly sensitive, with India’s central government and global institutions like the World Bank working towards boosting tourism in Maharashtra. “Instead of becoming a leading travel destination, Mumbai risks losing domestic and international footfall to more affordable states,” AHAR warned.
The association has reaffirmed its commitment to compliance and industry dialogue and urged the state to reassess the tax framework in light of its economic implications.
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