The Supreme Court today issued an interim order suspending the gazette notification which imposes a Rs 200 million Excise Tax on alcohol and beer manufacturers.
The new minimum excise tax of Rs. 200 million, aimed at reducing the number of smaller players especially in the spirits market, was introduced in the government’s interim budget on 7 February 2015.
Last week, a global rating agency had pointed out that the proposals to impose a 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.
The impact is likely to be neutral for beer manufactures, including the market leader Lion Brewery PLC, the Fitch Ratings said in a release.
According to the rating agency, the 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.
Based on the latest reported data, the majority of licensed liquor manufacturers do not produce enough to meet the minimum monthly excise tax of Rs. 200 million.
The four bigger companies in the spirits market, however, already pay more than Rs. 200 million in excise tax monthly and they are likely to dominate the market as smaller players exit.
Fitch estimates the exit of small players could lead to potential market share gains of close to 10% in aggregate for surviving players, based on Excise Department statistics.
