Taxman shows leniency toward liquor sector and casino licence holdersThe liquor industry is already heavily taxed, and sales have dropped due to the lockdown, an official says.
Breaking with tradition, the government did not increase excise duty on liquor as people have become used to seeing during every budget season. And it also extended the time limit for paying royalty for casino licence holders, considering both to be part of the hospitality industry which has been hit the hardest by Covid-19 and deserved favour.
The government didn’t raise excise duty on tobacco products either, but the health risk tax has been doubled in the new Financial Bill presented by the finance minister to Parliament on May 28.
A senior Finance Ministry official said the government didn’t want to impose additional tax burden on the liquor industry because it was already heavily taxed, and liquor sales had decreased due to the ongoing virus lockdown.
“In the last five-six years, there has been a substantial rise in excise duty on liquor every year, and there should be a limit to this,” said a senior Finance Ministry official. “Another reason for not increasing excise duty on alcohol is that the industry is also suffering due to the impact of Covid-19 on the hospitality sector.”
According to the Nepal Beverage and Cigarette Industries Association, the hospitality sector accounts for 30 percent of annual alcohol consumption and households the rest. Nepal produces 20 million litres of liquor annually, the association said.
The Finance Ministry official said they decided on not raising excise duty considering the financial situation of the liquor industry.
According to the Financial Bill, the government will charge excise duty of Rs370 per litre of wine containing up to 12 percent alcohol, and Rs430 per litre on wine containing more than 17 percent alcohol.
Excise duty on whisky has been fixed at Rs1,325 per litre for 15 UP liquor, Rs990 per litre for 25 UP liquor and Rs920 per litre for 30 UP liquor. The tax is Rs456 per litre for 40 UP liquor and Rs375 per litre for 50 UP liquor.
The government’s decision not to impose extra tax burden on the liquor industry is welcome at a time when the liquor industry remains shuttered due to the lockdown, and there are no prospects of sales increasing with the hotel and restaurant sector closed down, said Ramesh Shrestha, president of the Nepal Beverage and Cigarette Industries Association.
“I don’t recall when the government didn’t increase excise duty on liquor in the 25 years I have been involved in the sector,” he said.
After the budget for the current fiscal year was unveiled in 2019, a few factories producing spirit for liquor shut down for a few months due to a dispute with the government over certain provisions in the Financial Act.
“The government said that spirit factories needed to produce 42 litres of sprit from one quintal of grain, up from the previous stipulation of 31 litres,” said Shrestha. “So some factories were closed for a few months until the requirement was reduced to 38 litres.”
Government officials also admit that the dispute with liquor producers at the start of the fiscal year and the current lockdown hit revenue collection from the liquor industry.
The government has already banned imports of foreign liquor in order to control imports of luxury goods.
Besides the liquor industry, the government has given casinos some leeway by extending the deadline for payment of annual royalties and exempting certain taxes for paying outstanding royalties.
As per the new provision, casino licence holders can pay the royalty within six months from the start of a new fiscal year. Earlier, they were required to do so within two months.
Casinos are required to pay an annual royalty of Rs40 million to the government, and an additional Rs10 million for games using modern equipment.
If a casino licence holder pays outstanding royalties and half of the additional fee for fiscal 2018-19, pays in full the royalty and additional fee for fiscal 2019-20 by mid-April 2021, the remaining half of the additional fee for 2018-19 will be waived.
“These relaxations were made considering that casinos are also part of the hospitality industry which has suffered badly due to the pandemic although the government has no interest in promoting the sector,” the Finance Ministry official said.