• Manufacturers lobby President’s Office
• Propose alternate arrangements to increase tax 

Despite the prevailing Government revenue crisis, the proposed tax of Rs. 2 per beedi stick in the 2023 Budget is yet to be implemented due to the lobbying efforts of beedi manufacturers.

Speaking to The Sunday Morning Business, Excise Department Commissioner (Legal and Enforcement)/Spokesperson Kapila Kumarasinghe stated that despite initially planning to commence taxing beedi sticks from 1 January onwards, the plans had to be postponed due to representations made by beedi manufacturers to the President’s Office. 

The manufacturers have reportedly proposed several alternate arrangements whereby they claim that the Government will be able to generate an equivalent revenue instead of imposing a tax of Rs. 2 on each beedi stick.

Kumarasinghe elaborated: “Beedi manufacturers have called on the President’s Office to introduce an alternative mechanism instead of the tax proposal in the 2023 Budget. Negotiations are currently ongoing in this regard. The manufacturers claim that there are other methods by which the Government can generate the revenue predicted under the proposal. 

“However, our view is that the proposal in the 2023 Budget must be implemented. We have already informed all permit holders regarding this new tax and have already issued the relevant circulars in order to implement this Budget proposal which was approved by Parliament.”

He further stated that a final decision from the President’s Office in this regard was being anticipated. Moreover, he noted that while the proposed tax had been predicted to raise an additional revenue of Rs. 4.5 billion, Excise officers were confident that they could raise around Rs. 10 billion in revenue per year if this tax was fully implemented.

While Sri Lanka has imposed taxes on the 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.”