Liquor licenses faster to support tourism

With the purpose of promoting tourism in Sri Lanka, the Department of Excise commenced a programme to expedite the issuance of liquor licenses to tourist establishments.

It is hoped that this new initiative would provide a solution to the mushrooming of unlicensed tourist establishments which deprive the Government of much needed tax revenue.

Deputy Commissioner of Excise Kapila Kumarasinghe told The Sunday Morning Business that the department was in the process of significantly cutting down the time taken to issue a liquor license.

“We have kept aside the archaic rules and regulations and have looked at the current needs of tourism. We are trying to adapt a new approach to cater to tourism and other sectors as well as the general public,” Kumarasinghe stated.

The department is aware of a growing number of tourist establishments which prefer to sell liquor without a license as the penalties for the offence are lower and less cumbersome in comparison to the lengthy procedures and inconvenience they would face if they applied for a license. Operating without a license also enables the establishment to avoid paying taxes.

“The root cause of the reluctance to apply for licenses is the lack of a flexible or affordable system. Once they are taken into the system they have to pay the license fee, cess duty, and other taxes and levies as appropriate,” Kumarasinghe said.

A survey is to be commenced by the department this week to ascertain the exact number of unlicensed establishments in the island. However, Kumarasinghe said that this would be no easy task due to the large number of “homestays” in tourist hotspots which are hard to police or track.

Under the new process, liquor licenses would first be issued through an expedited process to establishments in the tourist-heavy South of the island and then in the hill country.

For cognisable offences under the Excise Ordinance, the maximum fine is Rs. 100,000 or imprisonment of either description which may extend for a period of one year, and in the case of the repetition of the offence after conviction, the offender is liable for a penalty of Rs. 10,000 for each day the offence is so continued.

However, unlicensed offenders rarely suffer imprisonment and are usually let off with a fine and thus have little deterrent to carrying on its unlicensed business. Furthermore, unlicensed hotels sell liquor at a much lower price than that of licensed hotels, gaining an unfair competitive advantage over the licensed, law-abiding hotels and attracting a higher number of tourists for its affordability.

“Licensed hotels are selling in line with a different pricing policy which is much higher than unlicensed hotels. We must curtail such illegal practices which have the potential to destroy the liquor license system of the Department of Excise,” he said.

He added that the Department of Excise along with the Police carry out regular raids and come across many unlicensed establishments, at which point the owners are taken into custody with the stocks of liquor. However, he said that when tourists witness these raids and arrests, it tarnishes Sri Lanka’s image as a tourist paradise as for most tourists it is a “scary” experience.

The new approach to licensing
Following a careful inspection of the applicant, the Department of Excise has to recommend the applicant to the relevant divisional secretariat in order to be issued a liquor license.

Kumarasinghe also said that the Department of Excise considers issuing liquor licenses to yachts that sell liquor to tourists on board. This license would be similar to the Railway Refreshment Room License which permits the sale of liquor to the passengers from 11 a.m. to 2 p.m. and 5 p.m. to 8 p.m.

“There are approximately eight yachts operating around the country with tourists. They were asking for licenses to possess and consume liquor on board, so we are planning to issue them ones similar to the Railway Refreshment Room License.”

However, the new approach to licensing would not include the lowering of prices to make licenses more affordable to incentivise tourism establishments to purchase them. Kumarasinghe stated that if liquor sellers find it difficult to pay the amount, they should complain to the relevant institutions and lobby for the prices to be brought down through a budget proposal.

“If the rates are being reduced, it has to be put to Parliament and approved,” he said.

The Department of Excise issues 45 different types of licenses based on the type of business. License fees are fixed for each type and in certain categories subsidiary licenses are issued free of charge. A fee of Rs. 7,500 is levied for a non-refundable application. Excise licenses are renewed for periods of three years and the license holder can opt to renew annually.

According to the Excise Notification No. 983 in the Excise Ordinance, the annual license fee of the Distillery License except palmyrah is Rs. 100 million while the Manufacturer’s Wholesale Arrack/Beer/Foreign Liquor Outlet License, Toddy Bottling License, Wholesale License for Liquor, Supermarket Liquor License, and Tourist Board-approved Hotel License for hotels with over 200 rooms are Rs. 1 million each.

The Liquor Permit is issued free of charge for the transport of liquor within Sri Lanka and a minimal fee is levied for permits issued for the transport of spirits imported into Sri Lanka.

The prices of liquor are not fixed for sale in accordance with the open Trade Policy. However, under the Consumer Protection Act, either the manufacturer or the seller should state the selling price on the labels of the bottles and the selling prices are to be exhibited in all licensed places for off-sales and for on-site consumption.