Bengaluru businesses anticipate dip in sales as excise duty hike kicks in

The 20 per cent hike in excise duty announced in the state budget came into effect on Thursday, following a government notification on July 18.

Restaurant and bar owners in Bengaluru, who were unaware of when the order would come into effect, are now rushing to revise their selling prices before the weekend rush hits their businesses.

Amit Ahuja, managing director of a hospitality company running popular food and beverage joints in Bengaluru, said such a price would not impact businesses as much as it would consumers.

"As the selling prices of alcohol will automatically hike across restaurants and bars, the customer will be impacted," he said.

Ahuja was unaware of the order coming into effect from July 20 and is unsure how the hike will affect different types of alcoholic beverages across the board.

"We will have to quickly huddle up and check our buying prices before revising our selling prices accordingly," he added.

An owner of a prominent liquor store anticipated a few possible outcomes of this hike.

Illicit trade of alcohol

"People might switch brands and buy something more affordable, but such a steep hike could also encourage illicit trade of alcohol. People who cannot afford alcohol might even switch to consuming drugs instead," he said. He expects to see at least a 50 per cent dip in his business over the next 15 to 30 days.

The impact of such a hike will hit mid-range restaurants the most, said Pravesh Pandey, director-partner of a craft house.

"Fine dining restaurants that serve a specific section of society will not find it challenging to hike their prices because they offer a certain kind of an experience that people will be willing to spend a little extra. This is not the case with budget restaurants whose focus is on service over experience," Pandey added.

Mid-range and budget restaurants that are already battling inflation might risk losing their market when they are forced to hike their selling prices, he said, adding that this will lead to them being unable to accommodate a comfortable profit margin and struggle further.

Prasanna Kumar, co-founder of a popular brewing company, speculated a brief dip in consumption.

"I believe that the next few months might see a 10 to 15 per cent dip in the consumption of alcohol in the city as drinks will naturally become a little expensive," he said.