The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 Hon. Presiding Member, today we are debating two items: a Regulation under the Special Commodity Levy Act, No. 48 of 2007, and Rules under Section 52 of the Excise Ordinance.

¶ 02 The purpose of the new Excise Rules is not to impose fresh taxes, but to fix long-standing administrative gaps. We identified that certain Gazette provisions had loopholes exploited opportunistically to delay or evade payments, hampering revenue administration. These Rules aim to close loopholes, avoid arrears accumulation, and expedite administration.

¶ 03 Under the previous Gazette (No. 1846/8 of 2014, Notice No. 902), defaulters were given a six-month grace period with a 3% monthly surcharge on arrears compounded, but at the end of six months, the Department had little recourse except to cancel licenses—no quick legal path to recover dues. Some firms paid only one month’s arrears at the last moment, letting five months roll forward, inflating arrears. As of now, about Rs. 10,555 million is in arrears across 40 entities—14 in arrack production with surcharge, five on raw materials, 17 in toddy, and one each in gin and tobacco. Despite attempts, recovery was unsuccessful. In one case, when a license was cancelled and legal action pursued, the firm obtained interim relief by interpreting the six-month grace and Ministerial powers.

¶ 04 The new Rules provide that if due excise is unpaid for 30 days beyond the due date (typically the 15th of the following month), the Department can temporarily suspend the bottling/production license, immediately halting further arrears buildup. If nonpayment continues, within 90 days all licenses can be cancelled. The objective is to eliminate arrears and enhance collection efficiency.

¶ 05 On revenue performance, under our Government the three main agencies—Inland Revenue, Excise, and Customs—are exceeding targets, as reported to the Committee on Public Finance, with clear strategies going forward.

¶ 06 On the Special Commodity Levy, we followed due process via the Food Security Committee’s recommendation and Cabinet approval to impose an additional Rs. 40 per kilo on onions and Rs. 20 per kilo on potatoes to protect domestic farmers. Imposed in August, we already see reduced imports in September—a positive sign.

¶ 07 Regarding licensing concerns raised by the Opposition, previous governments allowed numerous legal loopholes; we will not allow such gaps to be exploited henceforth. We are building confidence by ensuring clean governance, equal treatment, and secure revenue systems, which also helps attract investment.

¶ 08 Therefore, the Regulation and Rules before Parliament will significantly improve revenue collection efficiency. Thank you.

¶ 09 Question put, and agreed to.

¶ 10 EXCISE ORDINANCE: RULES