Although no sales tax was being levied for the last two years, the government decided to reimpose the tax after permit room owners that their business was taking a beating. While liquor was sold over the counter minus tax, a 13 per cent sales tax was levied on IMFL served in permit rooms.

However, the cabinet's decision has bee flayed by shop owners, who fear that the tax will erode their already depleting customer base. Freddy Ginwalla, president of the Maharashtra Wine Merchants Association, said the government move was ``ill-advised and retrogressive.''

``Sales tax was removed and excise duty and sales tax merged in the final MRP in the first place because of a great deal of corruption,'' stated Ginwalla, adding that the move wouldpromote smuggling from neighbouring states where the prices of popular brands are lower.

According to Randip Singh, partner of Shah & Co Wines, Crawford Market, business has already fallen down by 18 to 22 per cent due to recession. ``With the levy of sales tax, business will fall by 30 per cent.'' Besides, customers would choose lower premium brands and even go in for country liquor, said Singh. ``This will mean that the government will lose a lot of excise duty.''

The major chunk of revenue for the excise department comes from the alcohol and cigarette business, h pointed put, and with customers now shifting base, excise duty earnings would go down, he stated. The move will also spur Illegal trading, feel liquor shop owners.

``Manufacturing companies will have no option but to increase the prices,'' says Ginwalla. Customers are going to be the worst-affected, he adds. ``The exorbitant prices are going to break our bones,'' says Shyam Matai, proprietor, Rocky Wines, Dahisar (E).