- Rs. 2 tax per stick to generate Rs. 3 b in State revenue
A tax of Rs. 2 will be imposed on each beedi stick at the production level from today (1) onwards in accordance with the proposal made in the 2023 Budget, with the Excise Department estimating that the move will generate an additional Rs. 3 billion in State revenue.
Speaking to The Sunday Morning Business, Excise Department Commissioner (Legal and Enforcement) and Spokesperson Kapila Kumarasinghe stated that in terms of the Excise Ordinance and the Tobacco Tax Act, the Department was entitled to tax all tobacco products including beedi sticks. However, while this requirement to tax beedi sticks had existed under the law, it had not previously been enforced.
“The Government in its 2023 Budget introduced a proposal under the Tobacco Tax Act to tax all beedi sticks of all lengths at Rs. 2 per stick. The Excise Department expects this exercise to generate an additional Rs. 3 billion in State revenue,” he stated.
While Sri Lanka has imposed taxes on raw material required for beedi sticks, the final beedi product has so far not been taxed. Calls to tax beedi sticks have grown recently as tax hikes on cigarettes have led to increased demand for beedi sticks, which are more harmful to one’s health than cigarettes.
While Section 2(1) of the Tobacco Tax Act clearly provides that beedi sticks should be taxed, neither the Excise Department nor previous governments had undertaken to ensure this. Consequently, the illicit beedi industry thrived in the shadows, unchecked by any regulation or taxation.
Section 2(1) of the Tobacco Tax Act notes: “There shall be charged, levied and paid on every cigarette, cigar, beedi and every kilogramme of pipe tobacco manufactured in Sri Lanka, a tax (hereinafter referred to as the ‘tobacco tax’) at such respective rates as may be fixed by the minister by order published in the gazette.”
According to the Excise Department’s Performance Report for 2021, revenue generated from the tobacco tax amounted to Rs. 37 billion in 2021.