COLOMBO: Sri Lanka’s Supreme Court issued an interim injunction suspending the government’s gazette notification which imposes a minimum monthly duty of Rs 200 million on arrack and beer manufacturers.
The Supreme Court issued this order when a petition filed by 4 liquor and beer companies was taken for hearing.
The four spirit makers filed the petition claiming that their fundamental rights were violated by the new excise tax.
The new minimum monthly excise tax of Rs. 200 million was introduced in the government’s interim budget on 7 February 2015 and subsequently a gazette notification was issued on 13th February by the Finance Minister Ravi Karunanayake.
The new Excise Tax aimed at reducing the number of small operators in the spirit market was to go into effect from 1st April 2015.
According to the extraordinary gazette notification Liquor Manufacturing Licenses of all arrack and beer manufacturers who failed to pay the tax with respect to a certain month will be cancelled with effect from the 01st of the subsequent month.
Fitch Ratings last week said the minimum excise tax on liquor and beer manufacturers and tighten issuance of liquor licenses are positive for larger spirit manufacturers, including Distilleries Company of Sri Lanka.
According to the global rating agency, government’s proposals, which target manufacturers and retailers of alcoholic beverages to address problems of tax evasion, will reduce the number of players and act as barriers to entry.
Fitch said that the four large spirit makers such as Distilleries Company are already paying more than the minimum monthly excise tax of Rs. 200 million and they will less likely to be affected. However, the majority of licensed liquor manufacturers do not produce enough to meet the minimum and they are likely to exit the market.
The Supreme Court also ordered the respondents including the Finance Minister to file objections before 30th of April.
