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Port City duty-free shopping: Revised gazette gets oversight committee green light
Duty-free malls to be set up at the port city to promote Sri Lanka as a destination among high-end travellers. (file pic)
The Parliamentary Committee on Public Finance (CoPF) has approved the gazette notification outlining the regulations on items that Sri Lankan passport holders can purchase at the Colombo Port City duty-free mall, along with the permitted quantities.
Following the approval, the regulations will come into force once Parliament approves them.
CoPF’s chairman, Dr. Harsha de Silva, commended the officials who helped draft the regulations for their efforts in preventing the facility from being misused.
The officials told the CoPF that the possibility of the facility being misused had been minimised by separating outbound foreign travellers and inbound Sri Lankan travellers and limiting the number of goods and the allowance for local passport holders.
They also said that by minimising the onshore duty—the tax paid on foreign exchange—without totally removing it, the gazetted new regulations were an improvement on the earlier rules.
When asked to explain the reason for setting up the duty-free malls at the port city, an official told the CoPF that one of the aims was to promote Sri Lanka as a destination among high-end travellers.
An increase in the number of high-end travellers would also be complementary to the domestic market, the official said, answering a query by the CoPF chairman.
The April 22-dated gazette, among other matters, sets out regulations for local passport holders returning from abroad if they want to buy goods at the port city duty-free malls.
Another official told the committee, “Just as foreign travellers, the government wanted to allow Sri Lankan passport holders to shop in duty-free facilities in the port city.”
The negative impacts of the new regulations on local businesses, or ‘cannibalism’, were found to ‘be’ minimal, the officials said.
Currently, the country receives more low-budget tourists; however, with the start of operations of port city duty-free malls, more high-end travellers are expected to arrive in the country, and this would, in turn, promote local products, it was argued.
‘High-end’ travellers are ‘well looked after’ since new regulations do not impose any restrictions for foreign passport holders on goods, quantity, or allowance; however, they are not allowed to take the purchased duty-free goods into the country, the CoPF was assured.
Tourists are only one category of travellers, and they would usually spend an average of $174 a day, an official told the CoPF.
The ‘anchor tenant’ or the largest tenant is China Duty Free, an entity owned by China Tourism Group, one of the largest tour operators in the world, and one of its nearly five hundred subsidiaries, the CoPF was told.
China Duty Free, operating in numerous ports in China and some countries in Asia, would bring luxury brands to the duty-free malls and is also expected to bring more Chinese tourists into the country, as happened in Cambodia, an official told the CoPF.
When promoting Sri Lanka in other countries, it is usually asked whether the country offers high-end products to buy, and the non-availability of such products is a stumbling block to promoting the country among high-end consumers, it was argued.
A segment of high-end Chinese tourists travel to Europe solely to buy duty-free luxury brands so that they can cover part of their travel expenses, an official told the CoPF, adding that the port city would attract some of them.
“The duty-free operators need to ensure that the purchased goods are delivered to the ‘furthest point’ usually to the airport terminal on their departure,” said an official who referred to the new regulation as a measure to prevent certain regular foreign travellers from selling their purchased duty-free items locally.
The annual limit for Sri Lankan passport holders to spend at the mall was brought down from $5,000 to $2,000 in the gazette.
After several meetings with Customs and the Central Bank, a shorter and tighter list of items was finalised.
This list could be amended with public demand, pointed out a member of the CoPF. The Ministry of Finance, too, has recommended reviewing the list of items in three to six months, as stated.
It was also pointed out that sportswear, including branded shoes, is excluded from the current list.
Also, among the goods that were removed from the current list by the new regulations are sports equipment such as gym equipment, bicycles, bicycle accessories, and musical instruments.
According to the new regulations, local passport holders should visit duty-free malls in Colombo port city within four days of returning to the country, and the passport holder could be accompanied by one family member. Only a single visit is allowed.
The number of permitted items was reduced from 25 to 18 in the new gazette, and among the items removed from the new gazette are TVs, washing machines, and audio equipment.
The number of units of clothing allowed to be bought is limited to 16 units by the new regulations to prevent reselling: 4 units of formalwear, 4 units of casualwear, etc.
However, in the previous gazette, which was rescinded, 36 units of clothing were allowed.
The amount of confectionery, such as chocolates, is limited to 5 kg.
The earlier gazette setting out duty-free rules for the port city duty-free malls was rescinded at the direction of the Attorney General.
Apart from Parliamentarian Harsha de Silva (Chairman), the CoPF includes State Minister Suren Raghavan, Wajira Abeywardena, and Madhura Withanage.
Investment Promotion Ministry Acting Secretary Anoja Herath, Trade and Investment Policies Department Director General K.A. Vimalenthirajah, Colombo Port City Economic Commission Chief Operating Officer Revan Wickramasuriya, and Colombo Port City Economic Commission Acting Director General E.D.P. Soosaipillai were among the officials who made submissions.
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