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Excise Tax revenue plunges as liquor sales significantly drop

The Excise tax revenue targeted for the year 2022 is plummeting as the sale of alcoholic beverages have significantly dropped owing to the recent excessive pricing on the booze, the Department of Excise revealed.

The prices of DCSL brands of liquor has been increased by an average of Rs. 150 per 750 ml and with immediate effect.

The move follows the 2.5% Social Security Levy coming into force from 1 October. The levy has a cascading effect on manufacturers, wholesalers and retailers.

According to the Department of Census and Statistics, headline inflation in Alcoholic Beverages in September was 39.4% as against 35.6% in August.

Excise Chief M. J. Gunasiri said that they were unable to meet the required targets of the tax revenue on alcoholic spirits as the sale of booze had reduced significantly.

The Excise Commissioner General had pointed out that they were given a target of Rs.185 billion to achieve by the end of 2022 from the Ministry of Finance and by June they have only achieved Rs.90 billion.

Although half of the target had been achieved by the first six months, it will not be possible to achieve the rest within the next six months as the sale of liquor is drastically going down since the last couple of months.

The increase of VAT twice within the year and the prices of Ethanol and fuel had skyrocketed in the first few months had forced the manufacturers to increase their pricing on the liquor products, thus resulting in the consumers to distance themselves from the booze gradually, the manufacturers have pointed out.

Also, they have told the Excise that 37% of Sri Lanka’s liquor consumption is based on illicit products and by controlling the illicit factor the legalized products could gain its sales gradually.

The Excise chief had responded by applying the recently introduced security sticker feature on the legalized products, the illicit trade could be addressed efficiently.

The Department of Excise has seen in its revenue dip as price hikes hit consumption of legal alcohol products.

However, since then there has been a further significant drop in sales that has impacted revenue collection Commissioner General of Excise M.G. Gunasiri had told industry representatives last Friday during a meeting.

Alcohol industry representatives too had outlined that it was difficult to achieve production and revenue targets for this year, as consumer purchasing power has been significantly impacted by the cost-of-living rise.

Concerns were also raised on consumers switching to illicit alcohol, as the price of legal products skyrocketed. Sri Lanka has one of the highest per capital consumption of alcohol, with the majority of consumption being illicit, reports the World Health Organisation.

Commissioner General of Excise Gunasiri had stated that the recently introduced security sticker could help reduce illicit alcohol, but this does not take into account the hundreds of illicit liquor dens that operate around the country.

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