December 07, Colombo (LNW): Cabinet approval will soon be sought to remove the Value-Added Tax (VAT) on brown sugar produced by Lanka Sugar, a state-owned enterprise. The move aims to address the growing stockpile of unsold brown sugar at the Pelwatte and Sevenagala plants, according to Deputy Minister R. M. Jayawardhana, who raised the issue in Parliament.
Industries Minister Sunil Handunnetti highlighted that Lanka Sugar’s brown sugar faces an 18% VAT, alongside a 2.5% Social Security Levy, whereas imported white sugar is exempt from VAT. This discrepancy results in higher production costs for brown sugar, pricing it at approximately Rs.300 per kilogram at the factory, compared to Rs.220 for imported white sugar.
“The VAT on brown sugar must be removed urgently to clear the stockpile and ensure the sustainability of factory operations. Without this concession, the factories face significant operational challenges,” Minister Handunnetti stated.
Lanka Sugar was established in 2011 following the expropriation of Pelwatte Sugar and other firms. The factories, previously under private ownership, were brought under state control during the Rajapaksa administration, with substantial taxpayer funding used to sustain operations.
Deputy Minister Jayawardhana further noted that the Pelwatte Sugar facility currently holds 1.5 million liters of ethanol, adding another layer of operational and logistical challenges for the enterprise.
Under Sri Lanka’s Special Commodity Levy Act, essential food items like white sugar are subject to a simplified single tax structure. A similar approach for brown sugar is expected to provide the necessary relief to reduce production costs and boost the competitiveness of Lanka Sugar in the domestic market.
The proposal to remove VAT is seen as a critical step to revive the struggling state enterprise and ensure its continued contribution to Sri Lanka’s economy.
