Officials of the Finance Ministry presented the steps taken to increase excise duty on cigarettes before the Committee on Public Finance coming under the Order under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989. 

The officials of the Ministry of Finance made this presentation during the meeting of the Committee on Public Finance held on 11.03.2025 in Parliament, chaired by (Dr.) Harsha de Silva, Hon. Member of Parliament.

The Committee stated that the increase in the excise duty on cigarettes cannot be approved without concrete data and emphasized the need for justification regarding the steps taken to increase the excise duty on cigarettes at the previous Committee meeting held. Accordingly, it was also pointed out that studies conducted on excise revenue from cigarettes indicate that this calculation method has led to a decline in government revenue while increasing the profits of particular manufacturing companies. Therefore, the importance of ensuring that this tax revision would indeed be beneficial to government revenue was emphasized and consequently, was decided to reconsider following further clarifications from officials of the Ministry of Finance, regarding the excise duty increase.

Accordingly, following a discussion held at length, the Committee approved the Order under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989.

Two Orders under the Special Commodity Levy Act, No. 48 of 2007 were also taken into consideration following which, approval was given.

Accordingly, Order under Section 5 of Special Commodity Levy Act, No. 48 of 2007 published in the Gazette Extraordinary No. 2417/20 sought to further extend the period of validity of the Special Levy that had already been imposed on 63 commodities including essential food items at the same rates after obtaining recommendations from the relevant line ministries. The Order under Section 5 of Special Commodity Levy Act, No. 48 of 2007 published in the Gazette Extraordinary No. 2421/03 sought to grant tax concessions for the dates imported to be distributed free of charge during Ramadan fasting period.

The Committee on Public Finance also took into consideration the protocol amending the Section 28(6) of the Agreement between the governments of Sri Lanka and the government of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes in income which was signed at the government level in India, on 16th December 2024 and approved the same.

This meeting was attended by Hon. Deputy Ministers (Dr.) Harshana Suriyapperuma and along with Hon. Members of Parliament Ravi Karunanayake, (Dr.) Kaushalya Ariyaratne, Wijesiri Basnayake, Arkam Ilyas, Nimal Palihena, and) Lakmali Hemachandra, (Attorney-at-Law). 

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The Parliamentary Committee on Public Finance (COPF) has denied approval for the proposal submitted by the Ministry of Finance to increase the Excise Duty on cigarettes.

The Committee deliberated on the Order under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989, and the Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52).

Presenting their views, Finance Ministry Officials said that under the Order pursuant to Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989, an increase of 5.9% has been proposed for the excise duty imposed on all items subject to a fixed rupee value-based excise duty, including motor vehicles, cigarettes, aerated beverages, and tobacco products. 

They further said that under Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52), an increase of 5.9% in the excise duty on liquor products has also been proposed.

Chairman of COPF, MP Harsha de Silva said the increase in the excise duty on cigarettes cannot be approved without concrete data and emphasized the need for justification regarding the steps taken to increase the excise duty on cigarettes. 

Furthermore, he pointed out that studies conducted on excise revenue from cigarettes indicate that this calculation method has led to a decline in government revenue while increasing the profits of particular manufacturing companies. 

Therefore, he stressed the importance of ensuring that this tax revision would indeed be beneficial to government revenue. 

However, the Chair decided to reconsider the Order issued under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989 at the next Committee meeting following further clarifications from officials of the Ministry of Finance, regarding the excise duty increase.

Meanwhile, the proposal to increase the excise duty on liquor under Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52) was approved by the Committee. 

During the discussions, Members of Parliament raised concerns that such tax increases could potentially drive individuals towards the consumption and production of illicit liquor. 

In response, officials stated that raids against illicit liquor operations are being conducted systematically. 

Additionally, they mentioned that within the past two months, the production of liquor in the country had increased by 22%, while revenue had grown by 23%. 

Furthermore, it was stated that plans are underway to introduce a new category of liquor to minimize the consumption of illicit liquor.

The matters were raised during a meeting of the Committee on Public Finance, chaired by MP Harsha de Silva, in Parliament recently (06 Mar). (Newswire)

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