Excise Department of Sri Lanka

Summary

• The Excise Department of Sri Lanka, functioning under Ministry of Finance, is responsible for collecting excise tax in Sri Lanka.
• Excise officers are one of the four authorised officer categories to enforce the National Authority on Tobacco and Alcohol (NATA) Act, the main legal framework on tobacco and alcohol control in Sri Lanka.
• There are reports on interactions between Ceylon Tobacco Company PLC (CTC) and the Excise Department and its officers, violating the recommendations of Article 5.3 of the Framework Convention on Tobacco Control (FCTC).

Background

The Excise Department of Sri Lanka was established under the Excise Ordinance No.08 of 1913. It is identified as the third largest state tax collector by the [Central Bank of Sri Lanka. According to the Department’s website, their vision is to be “the most respectful and responsible revenue collection public institution in order to enhance the public revenue through formally regulating the tobacco and liquor manufacturing”. With regards to their functions related to the regulation of tobacco, alcohol, and other addictive substances, the following are mentioned:

• “Supervision and control of all excise-licensed premises and the collection of revenue thereof.”
• “Efficient and effective implementation of Excise Ordinance and Tobacco Tax Act.”
• “Act as a law enforcement institution regarding the Poisons, Opium and Dangerous Drugs Ordinance.”
• “Implementation of National Authority on Tobacco and Alcohol (NATA) Act for the social protection of the nation.”
• “Building a close relationship with other law enforcement institutions such as Police, Customs and Inland Revenue Department in Sri Lanka.”

The Excise Department of Sri Lanka is under the purview of the Ministry of Finance. The Commissioner General of Excise holds the executive powers and is assisted by two Additional Commissioner Generals in rendering these functions.

Image 1: Headquarter of Sri Lanka Excise. Source: EconomyNext

Tobacco Related Activities

Liaisons with Tobacco Industry

Ceylon Tobacco Company PLC (CTC), a subsidiary of British American Tobacco (BAT), holds the monopoly of cigarette manufacturing and trade in Sri Lanka. The Excise Department of Sri Lanka has liaised and continues to liaise with CTC violating the recommendations of the FCTC Article 5.3 as mentioned below.

Anti-Illicit Trade (AIT) Hotline by CTC

According to the Annual Report 2015 of the Ceylon Tobacco Company PLC (CTC), information obtained from the Anti-Illicit Trade (AIT) hotline managed by the CTC “is directed to the relevant law enforcement authorities including the Sri Lanka Police, Sri Lanka Customs and the Excise Department for appropriate action”. All these institutions are authorised enforcement agencies of the National Authority on Tobacco and Alcohol (NATA) Act, the main legal framework for tobacco control in Sri Lanka. However, these partnerships are not mentioned in the official websites of any of these institutions. This interaction is mentioned only in the Annual Report 2015 of the Ceylon Tobacco Company PLC (CTC).

Direct and Indirect Engagement with CTC

According to the Annual report 2015 of CTC, they engage with government regulators including the Department of Excise, the Sri Lanka Customs, NATA, the Ministry of Health, the Ministry of Finance and planning “on a continuous and systematic basis”, which enables them “to identify what matters to them the most”. It further mentioned that these engagements provide them “an opportunity to obtain feedback on our policies, procedures and operations”. (Image 2).

Image 2: An excerpt from the CTC annual report 2015.

One-Day Training Course for Excise Officers

According to the Performance Report 2018 of the Excise Department of Sri Lanka, Ceylon Tobacco Company PLC (CTC) provided a one-day training programme on the tobacco industry and cigarette manufacturing to Excise officers. Reportedly, a total of 668 Excise Inspectors participated in this training in 16 groups (Image 3). The training was only mentioned in the 2018 Annual Report.

The same table that mentions the above also mentions that Lion Beer Company provided a one-day workshop on Malt liquor industry for 641 Excise Guards, which was completed as 14 courses in 2018 (Image 3). According to the Performance Report 2017 of the Excise Department of Sri Lanka, Lion Beer Company provided a series of one-day workshops on malt liquor industry from 23 August 2017 to 13 October 2017 as well. A total of 280 Excise Inspectors including the Chief Excise Inspector had participated in this workshop in 12 batches. The National Authority on Tobacco and Alcohol (NATA) Act No 27 of 2006 is the main legal framework for both tobacco and alcohol control in Sri Lanka.

Image 3: Excerpt from the performance report 2018 of Excise Department mentioning the One-Day training course provided by CTC and One-Day workshop conducted by Lion beer company.

Media Statements Supporting Tobacco Industry Narratives

Media statements made by the officials affiliated to the Excise Department of Sri Lanka supporting tobacco industry narratives/goals are presented in the Table 1.

Table 1: Summary of media statements by Excise Department supporting tobacco industry narratives

Timeline	Background	Stated by	Statement supporting the tobacco industry	Remarks
April 2023	Then Finance Minister Ranjith Siyambalapitiya, announced a 20% of excise tax hike on cigarettes and alcohol with effect from 1st January 2023.	J.M.S.N. Jayasinghe, Commissioner General of Excise	Reduction of collected tax revenue during the first two months of 2023	The tax revenue collected from tobacco and alcohol for the year 2023 was Rs. 178.57 billion (Rs. 1 billion from tobacco) and the progress for the tax collection was 98%. According to the performance report of excise department in 2023, “Compared to the year 2022, a substantial growth can be witnessed in tobacco tax in the year 2023.” In 2022, tax revenue from tobacco was Rs. 39.48 million.
		Kapila Kumarasinghe, Spokesperson of the Excise Department	The increase of tax did not follow the consultation of the department.	-
July 2023	Then President and the Minister of Finance, Economic Stabilisation and National Policies Ranil Wickremasinghe issued a gazette notification on a 20% increase of excise duty on tobacco and alcohol with effect from 1st of July 2023.	Kapila Kumarasinghe, the Deputy Commissioner of Excise and Law Enforcement and the spokesperson of Excise Department of Sri Lanka	Increase of tax will lead to an increase of beedi use. Collecting beedi tax due will be challenging due to the objections from beedi manufacturers against regularisation and taxation of beedi industry. The department has requested the Ministry of Finance, to revise the forecast revenue target for 2023, as the consumption of cigarettes and alcohol is expected to decrease significantly due to the price hike, reducing the tax revenue.	Ceylon Tobacco Company PLC (CTC) had brought in the ‘increase in beedi use’ and ‘increase in illicit trade” arguments many times against raising cigarette tax in Sri Lanka. The CTC Annual Report of 2023 mentioned that the beedi market share is 67% quoting the data from Research Intelligent Unit (RIU). A study conducted by the Institute of Policy Studies of Sri Lanka (IPS) revealed that the “changes in cigarette prices do not yield a significant substitution effect on the use of beedis.” The Trend Survey in 2023 conducted by Alcohol and Drug Information Centre (ADIC) Sri Lanka showed a slight increment in trend among beedi users (Sri Lankan males above 15 years) compared to 2022. Please visit our pages on Industry Arguments: Increase of Beedi Consumption and Industry Responses to Tobacco Tax Increase in 2016 for more details.
July 2025	The Committee on Public Finance (CoPF) approved an Extraordinary Gazette raising the tobacco tax on locally manufactured beedi sticks from Rs. 2 to Rs. 3 per stick, with effect from 2 April 2025.	The Commissioner General of the Excise Department	Media quoted his statement at the CoPF stressing the following points: Only 840 of the 1,140 licensed beedi manufacturers have renewed their licenses for the year 2025 following the tax increase in April 2025. The tax revenue from beedi products is below the anticipated level. The revenue gap is because of smuggling and insufficient enforcement actions.	-

Public Announcements Favouring Importation of Chinese Cigarettes

In May 2019, then Minister of Finance, Mangala Samaraweera announced the government’s plan to import Chinese cigarettes to increase the tax revenue from cigarettes and to meet the demand of Chinese citizens living in Sri Lanka.

Kapila Kumarasinghe, the Deputy Commissioner of Excise and Law Enforcement and the spokesman for the Excise Department of Sri Lanka, argued in favour of the Minister’s proposal, stating that “we can’t halt the smuggling of cigarettes by enforcement, because of many gaps in the system”. In the same statement he contradicted himself by saying “by legalising the import of cigarettes, we can monitor and impose regulations on the stocks coming in and we can curtail the black-market trade”. Due to the strong opposition and criticism from tobacco control advocates and health professionals, and the then Minister of Health Rajitha Senaratne the proposal was ultimately withdrawn.

Please visit our pages on Mangala Samaraweera and Rajitha Senaratne for more details.

Alcohol Related Activities

Proposal to Introduce Low-Priced Alcohol Product

In December 2024, the Department of Excise proposed to introduce a low-priced alcohol product as an alternative to illicit alcohol. In a press briefing, U. L. Udaya Kumara Perera, Commissioner General of Excise, stated that there is a proposal to introduce an alcohol product for an affordable price that meets standards following a discussion with the Finance Ministry. He stated that an alternative should be provided in parallel to the raids to curtail the illicit alcohol, which contributes to around 30% of excise revenue loss. He further mentioned that this new product would be issued to the local market following the examination by the Government Analyst’s Department.

The proposal was reintroduced on 9 March 2025 at a meeting of the Parliamentary Committee on Public Finance (CoPF) despite the opposition from the health care professionals and other organisations. However, the proposal has not been implemented as of February 2026.

Excise Officers Accused of Distributing Fake Security Stickers

In August 2023, a Member of Parliament Buddhika Pathirana, revealed in parliament that alcohol bottles seized from over 100 retail stores across the country contained fake security stickers. He stated that the alcohol bottles with fake stickers were distributed from a house in Gampaha District owned by an Excise Officer named Alphonso Russell Lambert. MP Pathirana referred to an investigation on similar fake stickers in Pasikudah that was interrupted by Kapila Kumarasinghe, Additional Excise Commissioner General (Revenue), via a telephone call. MP Pathirana further stated that both Lambert and Kapila were accused of taking bribes in 2004.

Excise Officers Accused of Obtaining Liquor Permits

MP Buddhika Pathirana said in the Parliament, that excise officers have obtained liquor licenses under the names of newly registered companies Phoenix and AZ despite them being not allowed to do so. He further explained that the Board of Directors of these companies have been changed after obtaining the licenses. It resulted in a loss of approximately Rs 15 millions in government tax revenue, which could have been collected during the process of transferring the liquor license to another name (Image 4). No further details are available in the public domain.

Image 4: Excerpt from the statement of MP Pathirana made on 23 August 2023 at the parliament. Source: Hansard

Proposal on Implementing Online Sale of Alcohol during COVID-19 Curfew

In June 2021, the Department of Excise requested permission from the Ministry of Finance for online sale of alcohol products due to travel restrictions imposed during COVID-19. According to Kapila Kumarasinghe, then Spokesperson for the Department of Excise, the proposal was based on the requests made by public and the supermarket operators. Media reported that the proposal has been approved by the Finance Ministry, subject to the authorisation of the National Operations Centre for the Prevention of the Covid-19 Outbreak (NOCPCO).

Sri Lanka Medical Association (SLMA), Government Medical Officers Association (GMOA), and Association of Medical Specialists (AMS) opposed the government’s decision and wrote a letter to the then Prime Minister and the Minister of Finance, Mahinda Rajapaksa, requesting not to permit the online sale of alcohol, mentioning the health and socioeconomic hardships faced by the citizens due to COVID-19.

However, the proposal for online alcohol sale was rejected by NOCPCO. NOCPCO was established on 16 March 2020 to coordinate all preventive, control, quarantine, and all other related pandemic operations under the instructions of HE the President.

Advocating for Reopening of Alcohol Sales Outlets during the COVID-19 Pandemic

Sri Lanka imposed a nationwide curfew starting from 20 March 2020 as a preventive measure against the spread of COVID-19, which resulted in the closure of tobacco and alcohol sales outlets. Kapila Kumarasinghe, then spokesperson of Department of Excise, repeatedly appeared in media, with favourable statements towards re-opening the alcohol sales outlets arguing that their closure led to increased production of illegal alcohol and led to a loss of government revenue. Media statements done by the Excise Department of Sri Lanka on the issue is summarised in the Table 2.

Table 2: Summary of media statements supporting tobacco industry narratives

Date	Media	Stated by	Statement	Remarks
08 April 2020	adaderana.lk	Channa Weerakkody, Southern Province Assistant Commissioner of Excise	“Due to licensed liquor shops remaining closed during curfew hours, there is a high demand for liquor and as a result the manufacturing of illicit liquor in villages has increased significantly”.	-
20 April 2020	Daily Mirror Online	Kapila Kumarasinghe, Deputy Commissioner of Excise and the spokesman	“The government is losing an estimated Rs.500 million daily or Rs.15 billion monthly in tax revenue due to the ban.”	Expert Committee on Tobacco, Alcohol and Illicit Drugs of Sri Lanka Medical Association (SLMA) criticised this statement saying that “the myth of ‘revenue generation’ from alcohol was propagated by the alcohol industry to obtain profits over the dead bodies of its customers”. SLMA further mentioned that one of SLMA’s main functions is to eliminate illicit alcohol production.
20 April 2020	The Morning		“The department had incurred a loss of over Rs. 500 million per day during the curfew period.”
17 May 2020	The Sunday Times	No specific person mentioned	“The illegal operators have caused 10%, or Rs 2.5 billion, of excise tax loss to the state during this period”.	-
		Kapila Kumarasinghe, Deputy Commissioner of Excise and the spokesman	“The government was pushed to let liquor shops open in areas where the curfew was eased because of the roaring bootleg trade”.	-
13 June 2021	The Island Online	M. J. Gunasiri, Commissioner-General of Excise	“Since the sale of alcohol was banned with the indefinite closure of all licensed liquor sales outlets (commonly called ‘wine stores’), taverns, clubs, and hotels on 21 May 2021, the loss in terms of tax income to the Excise Department for the past 18 days (up to June 8) has shot up to more than Rs. 10 billion”.	-
18 June 2021	hirunews.lk	No specific person mentioned	“The Government had incurred a loss of about Rs 500 million due to the closure of liquor outlets in view of the imposed travel restrictions. They further stated the total revenue lost stands at around Rs 15 billion.”	-
15 November 2021	Daily Mirror	M.J. Gunasiri, Commissioner General of Excise	“The illicit liquor industry was mushrooming countrywide during the recent Covid lockdowns of six to eight weeks as the sale or availability of state approved alcoholic beverages did not exist like any other non-essential goods.”	-
26 August 2024	Economynext		“There is a 30 percent increase in illicit liquor as the prices of liquor have risen in the last two years.”	-

Implications

Article 5.3 of the Framework Convention on Tobacco Control (FCTC) recommends to the Parties to avoid any interactions with the tobacco industry, in order to protect public health policies from commercial and other vested interests of the tobacco industry. NATA as the focal point for implementing the FCTC in Sri Lanka, published a set of national guidelines to implement the FCTC Article 5.3 in 2019.Thus, then engagements mentioned in this page violates the recommendations of the FCTC Article 5.3 and the national implementation guidelines by the NATA. As the Excise Officer is one of the four categories of authorised officers to enforce the National Authority on Tobacco and Alcohol (NATA) Act, the main legislation framework related to tobacco and alcohol control in Sri Lanka, this generates serious concerns.

It is also evident that the interactions with the tobacco and alcohol industries, including the training sessions conducted by them, and the statements directly and indirectly favouring the stance of the industries, promote the image of the manufacturers. Thus, it may violate the section 35 of the NATA Act.

TobaccoUnmasked Resources

• Ceylon Tobacco Company PLC (CTC)
• British American Tobacco (BAT)
• FCTC Article 13: Tobacco Advertising, Promotion and Sponsorship
• Framework Convention on Tobacco Control (FCTC)
• Sri Lanka Customs
• National Authority on Tobacco and Alcohol (NATA) Act
• Mangala Samaraweera
• Rajitha Senaratne
• Industry Responses to Tobacco Tax Increase in 2016
• Industry Arguments: Increase of Beedi Consumption