CoPF approves beedi tax hike amid revenue and licencing concerns

Wednesday, 30 July 2025 00:04 - - {{hitsCtrl.values.hits}}

CoPF Chairman Dr. Harsha de Silva

Approves Gazette to raise Tobacco Tax on beedis from Rs. 2 to Rs. 3 per stick
Excise Department Commissioner General reveals only 840 of 1,140 beedi manufacturing licences renewed after tax hike from 2 April 2025
Says 2024 revenue falls short with Rs. 1.05 b collected vs. Rs. 2 b target
Notes Rs. 469 m collected so far in 2025; cites weak enforcement and illicit trade growth
MPs warn higher taxes may push producers into informal market; suggests lowering tax to boost legal compliance and revenue
Calls for data-driven approach to future tobacco tax policy

The Committee on Public Finance (CoPF) has approved the Extraordinary Gazette Notification No. 2430/16 dated 1 April 2025, which increases the Tobacco Tax (TT) on locally manufactured beedis from Rs. 2 to Rs. 3 per stick. The revised tax rate came into effect on 2 April 2025.

This decision, in line with proposals in Budget 2025, was made under the provisions of the Tobacco Tax Act, No. 8 of 1999, through an Order issued by the Minister of Finance.

This was approved at the CoPF Chaired by MP Dr. Harsha de Silva held at Parliament recently (22).

During the session, the Excise Department Commissioner General revealed that while 1,140 licences had been issued to beedi manufacturers in the previous year, only 840 were renewed in 2025 following the tax hike. It was also disclosed that revenue from the sector has also fallen below expectations, with only Rs. 1,055 million collected in 2024 against a Rs. 2 billion target, and just Rs. 469 million collected so far this year. He attributed this shortfall to rising incidents of large-scale beedi smuggling and inadequate enforcement.

Committee members raised concerns about the unintended consequences of the tax increase, suggesting that higher taxes may be driving legal producers out of the formal market and into illicit operations.

Some Committee members proposed that a reduction in the tax rate could incentivise legal compliance and potentially improve revenue collection.

They also called for future tax revisions to be based on scientific and data-driven evidence to ensure they effectively meet revenue and regulatory objectives.

The meeting was attended by MPs Ravi Karunanayake, Shanakiyan Rasamanickam, Dr. Kaushalya Ariyarathne, Arkam Ilyas, and Nimal Palihena.

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