By Saman Indrajith

Finance Ministry officials have recently informed the Parliamentary Committee on Public Finance (COPF) that during the past two months, liquor production in the country has increased by 22%, and revenue has grown by 23%.

During a meeting presided over by COPF Chair Dr. Harsha de Silva, the Finance Ministry officials announced that plans were underway to introduce a new brand of liquor.

The COPF approved a proposal submitted by the officials to increase the excise duty on liquor.

Finance Ministry officials informed the committee that, under the Order pursuant to Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989, a 5.9% increase had been proposed in the excise duty on all items subject to a fixed rupee value-based excise duty, including motor vehicles, cigarettes, aerated beverages, and tobacco products. Furthermore, under Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52), a 5.9% increase in the excise duty on liquor products had also been proposed, the officials said.

The Committee considered the Gazette Extraordinary No. 2418/42, published under Excise Notification No. 01/2025 (Excise Duty on Liquor) issued under Section 22 of the Excise Ordinance (Chapter 52), Gazette Extraordinary No. 2418/43, published under the Order under Section 3 of the Excise (Special Provisions) Act, and Gazette Extraordinary No. 2415/79, published under the Regulations under Section 112 of the Regulation of Insurance Industry Act No. 43 of 2000, at the committee meeting.

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

Dr. de Silva, however, did not approve the proposal to increase the excise duty on cigarettes. He stated that an increase in the excise duty on cigarettes could not 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 on excise revenue from cigarettes indicated the way the excise duty was calculated had led to a decline in government revenue while increasing the profits of the tobacco manufacturing companies. Therefore, he stressed the importance of ensuring that this tax revision would help increase government revenue. Consequently, 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.

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 considered and approved by the COPF. During the discussions, Members of Parliament raised concerns that such tax increases could potentially drive individuals to the consumption and production of illicit liquor. In response, officials stated that raids against illicit liquor operations were being conducted.