The Committee on Public Finance has approved the proposal submitted by the Ministry of Finance to increase excise duty. This decision was reached when the Committee met in Parliament under the chairmanship of Member of Parliament Dr. Harsha de Silva.
During the meeting, Excise Notification No. 01/2025 under Section 22 of the Excise Ordinance (Chapter 52), an order under Section 3 of the Excise (Special Provisions) Act No. 13 of 1989, and orders under Section 112 of the Insurance Industry Regularization Act No. 43 of 2000 were considered. The officials presented that the order under Section 3 of the Excise Duty (Special Provisions) Act, No. 13 of 1989 proposes to increase excise duty on all taxable items by 5.9%, including motor vehicles, cigarettes, soft drinks, and tobacco, with the value specified in rupees.
The officials further informed the committee that an increase of 5.9% in excise duty on alcoholic beverages was also proposed under Section 22 of the Excise Ordinance (Chapter 52) through Excise Notification No. 01/2025. Addressing the matter, the Chairman stated that approving the increase in excise duty on cigarettes without specific data was not possible. He emphasized that studies have shown the government receives relatively low revenue from cigarette taxation, while profits of the manufacturing companies continue to rise. He stressed the importance of ensuring that the government benefits from taxation and requested further clarification on how the government intends to generate revenue through these tax increases.
Due to the concerns raised, the Chairman decided that the proposal to increase excise duty under Section 3 of the Excise Duty (Special Provisions) Act, No. 13 of 1989 would be reconsidered at the next committee meeting, following further explanations from Finance Ministry officials. However, the proposal to increase excise duty on alcoholic beverages under Excise Duty Notification No. 01/2025 was considered and approved.
Committee members also raised concerns that higher excise duties on alcohol could lead to an increase in illegal liquor production and consumption. In response, officials stated that systematic raids on illegal alcohol operations were ongoing. They further revealed that alcohol production had increased by 22% in the first two months of the year, contributing to a 23% increase in revenue. The officials also mentioned that a new type of liquor is planned to be introduced to discourage the consumption of illegal alcohol.
Additionally, the Committee reviewed and approved regulations under Section 112 of the Insurance Industry Regulation Act No. 43 of 2000. Under these new regulations, the annual fee imposed on insurance businesses will increase from 0.125% to 0.2% of the gross written premium. This adjustment is intended to cover the rising operational expenses of the Insurance Regulatory Commission of Sri Lanka (IRCSL).
