• Tax relief on intermediary goods expected
• Aimed at lowering production cost for local industries, enhancing export competitiveness
• CESS on majority of intermediary goods to be removed in 2026

The Government’s plan to phase out Commodity Export Subsidy Scheme (CESS) taxes is set to provide immediate tax relief on intermediary goods as part of a broader effort to reduce production costs for industries catering to both domestic and export markets.

Speaking to The Sunday Morning Business, Department of Trade and Investment Policies Director General Ishani J. Abeyratne stated that the phased removal of CESS over the next four years was primarily aimed at lowering the cost of production for local industries while enhancing export competitiveness.

She noted that the initiative aligned with the Government’s target of achieving an export economy of $ 36 billion by 2030.

As part of the reform, the Government will prioritise the removal of CESS on intermediary goods, which is expected to reduce production costs for industries supplying both to the local and export markets.

“Intermediary goods are used by both local companies and export-oriented businesses. Our aim is to reduce the cost of producing finished goods and improve the competitiveness of export products,” she said.

Abeyratne further explained that intermediary goods referred to inputs used in the production of other goods.

Accordingly, the Government plans to remove the CESS tax on a majority of intermediary goods within this year, while the remaining CESS taxes will be gradually phased out over the following three years.

She added that the CESS tax on certain intermediary goods classified as sensitive by the Ministry of Industry and Entrepreneurship Development would be deferred for one year until April 2027.

Commenting further, she noted that goods were categorised based on the Broad Economic Categories (BEC) classification published by the United Nations, which distinguished between finished goods, intermediary goods, and consumption goods.

In March, the Cabinet of Ministers approved a proposal submitted by President Anura Kumara Dissanayake in his capacity as Minister of Finance, Planning, and Economic Development for the the phased removal of CESS taxes on goods and materials imported under 2,634 identified Harmonised System (HS) codes over a four-year period from 2026 to 2029.

The decision covers 2,634 HS codes and will see the gradual elimination of the CESS tax across the specified categories during the 2026–2029 period.

The CESS tax is currently imposed on selected imported goods and materials.