’Learn from Kerala, scrap AC tax’

After their Southern counterparts got a stay on the unpalatable 10.3% tax on pubs serving liquor in air-conditioning, city's hotel association mulls taking the judicial route too

'Learn from Kerala, scrap AC tax'

After their Southern counterparts got a stay on the unpalatable 10.3% tax on pubs serving liquor in air-conditioning, city's hotel association mulls taking the judicial route too

Almost 12 days after the Kerala Bar Hotels Association managed to get an interim stay on the recently imposed service tax on air-conditioned restaurants, our city's restaurant owners took inspiration from them.

They have decided to move the court for the exact same reason. They claim they the tax has been spiriting their patrons away since the last two months, when the tax was enforced.

"We are happy that restaurant owners in Kerala managed to get a stay on it.

After witnessing the success of the Kerala association, we have decided to approach the court to get the stay on the same," said Sudhakar Shetty, president Indian Hotel and Restaurant Association (AHAR) which has more than 8,000 members.

He continued, "This shows that the entire nation is worried over the service tax imposed on the hotel industry."

Heavy tax
In March, the Government of India had announced an across-the-board tax on services provided by restaurants serving liquor in an air-controlled setting: the disputed 10.3 per cent service tax levied on customers for drinking booze in an AC bar or hotel.

But restaurant owners do not feel like submitting to the tax regime sitting down, especially when it's sending their profits sloping down a curve.

Sukesh Shetty, vice-president, AHAR, said, "Restaurateurs are already charged VAT on their bills. An additional tax in the name of service on the same bills amounts to double taxation. It brings in lesser footfalls.
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The restaurant industry is already reeling under high inflation, price rise for various ingredients. It may not be able to bear this additional burden. The customer will prefer visiting roadside joints, and deprive the government of revenue and restaurants of business."

Kishore Shetty, restaurant owner from Navi Mumbai Hotel Association, grumbled that since the service tax came into force on May 1 this year, they have been selling and serving less liquor: 40 per cent less than the usual. You could pin that figure of loss on any average whisky bar.

"People have started shifting to cheaper brands. The sale of the best and fast moving brands has gone down drastically, affecting our business."

Then questioning the soundness of taxing people for sitting in an AC room in an otherwise fusty city, he said, "In this humid, coastal town, air conditioners are a necessity, not a luxury. The humidity has ensured that 99 per cent of the restaurants in Mumbai have AC. Otherwise it would inconvenience customers. "

And the customers of these pubs would be, other than pleased, more forgiving in their opinion if the tax were reversed.

Chandan Iyer, a resident of Khar, echoed Shetty's sentiments. "I have cut down on drinking in AC restaurants. Why waste money. Drinks are expensive as it is and then comes the mounting bill. Better to drink at home. The government needs to really withdraw these weird taxes before people start moving out of Mumbai."

As reported by MiD DAY earlier ('Dip in beer sales this summer'), almost three months after the Union and State budgets inflated the duty levied on liquor, the pinch is being felt, not just by revellers who have restrained their drinking, but also by revenue collectors, as was revealed in a meeting of the excise department.
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Liquor sales went down by 10 per cent in the city in April this year compared to April 2010, sinking it in losses.

Since the service tax came into force on May 1 this year, they have been selling and serving less liquor: 40 per cent less than the usual, say restaurant owners