Cigarette production in Sri Lanka has declined by 32% between 2022 and 2025 amid continued increases in taxes on tobacco products, Deputy Minister of Economic Development Nishantha Jayaweera said in Parliament today.
Responding to a question raised by MP Dayasiri Jayasekara, the Deputy Minister said annual cigarette production fell from 2.8 billion units in 2022 to 1.9 billion units in 2025.
He said the Government’s tobacco tax policy was introduced not only to increase state revenue but also to reduce healthcare costs and other adverse socio-economic impacts associated with tobacco use.
Excise duty on cigarettes has been increased four times since 2023. It was raised by 20% on January 1, 2023, and by another 20% on July 1 of the same year. It was subsequently increased by 14% on January 1, 2024, under the inflation index mechanism, and by a further 5.9% on January 11, 2025.
Meanwhile, VAT was increased from 15% to 18% from January 1, 2024, while the corporate income tax rate was increased from 40% to 45% from April 1, 2025.
Under the current excise duty structure introduced on January 11, 2025, the tax on cigarettes is calculated according to cigarette length and ranges from Rs. 26.59 to Rs. 109.95 per cigarette.
The Deputy Minister said the increase in tobacco taxes has contributed to a gradual rise in direct and indirect tax revenue while also supporting public health objectives and improving government revenue management.
