Excise License Fee Hike and Security Deposit Controversy | Impact on Small Distillers

“Port City Licences, Casinos & Policy Challenges | Competition, Compliance & Future Growth” | 2025.11.25 CoPF Clip 02

This meeting of the Committee on Public Finance addresses the rules and regulations under the Excise Ordinance, focusing primarily on the controversial increase in excise license fees and the introduction of a new, one-time security deposit for liquor manufacturers.

Key Discussion Points:

Procedural Challenge: The committee reviewed the need to re-gazette the Excise Rules after an earlier version was challenged in court on procedural grounds (Section 32 vs. 25 of the ordinance).

Security Deposit Issue: The central debate focused on the new requirement for a substantial one-time security deposit (e.g., LKR 20 million for Arrack, LKR 10 million for Bottling), which some manufacturers would have to pay in the new year.

Tax Equity Concerns: Committee members argued that imposing a flat, one-time deposit—irrespective of the company's production volume—was a regressive measure that disproportionately burdens small operators. Concerns were raised specifically for small entities like the Valikamam Cooperative Union (Tal Arrack), which might struggle to pay the required LKR 15 million deposit.

Rationale for Deposit: The Treasury representative explained that the deposit was introduced as an insurance measure based on the recommendations of a Ways and Means Committee, due to the industry's history of tax defaults exceeding LKR 10 billion.

Illicit Liquor: A side discussion touched upon the risk that increased legal fees could push more production into the illicit liquor market ("Kasippu").

Liquor Sales in Hotels: A separate issue concerning the inability of five-star hotels to sell liquor past 12 AM due to licensing ambiguities was brought up, urging the Excise Department to rectify the situation.

Final Approval with Condition: The committee approved the regulation but with a mandate for the Ministry of Finance to analyze the payment ability of small-scale distillers and explore flexible options, such as installment payments, for the one-time security deposit.

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සියළු ශ්‍රී ලාංකිකයින්ගේ ජීවිත ආලෝකමත් කළ හැකි දූෂණයෙන්, වංචාවෙන් තොර රටට වගකියන දේශපාලන සංස්කෘතියක් බිහිකිරීමේ සටනට ආචාර්ය හර්ෂ ද සිල්වා සමග අත්වැල් බැඳගැනීම පිළිබඳව ඔබට ස්තූතියි. වැඩි තොරතුරු දැනගැනීමට පහත සමාජ මාධ්‍ය ඔස්සේ සම්බන්ධ වන්න.

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