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)
