Cigarette production drops 32% amid higher tobacco taxes

Cigarette production in Sri Lanka has declined by 32% between 2022 and 2025 following a series of increases in tobacco taxes, Economic Development Deputy Minister Nishantha Jayaweera told Parliament yesterday (20).

Responding to a question raised by Parliamentarian Dayasiri Jayasekara, Jayaweera said annual cigarette production had fallen from 2.8 billion sticks in 2022 to 1.9 billion in 2025.

He said the Government’s tobacco tax policy was aimed not only at increasing state revenue but also at reducing healthcare expenditure associated with tobacco use and addressing its wider socio-economic impact.

According to the Deputy Minister, excise duties on cigarettes have been increased four times since 2023. The duty was raised by 20% in January 2023, followed by another 20% increase in July of the same year. It was increased by a further 14% in January 2024 under the inflation indexation mechanism and by 5.9% in January 2025.

Meanwhile, the Value Added Tax rate was increased from 15% to 18% in January 2024, while the corporate income tax rate was raised from 40% to 45% effective April 2025.

The current excise duty structure, introduced on 11 January 2025, is based on cigarette length, with the tax ranging from Rs. 26.59 to Rs. 109.95 per cigarette.

Jayaweera said the increase in tobacco-related taxes has contributed to a gradual rise in both direct and indirect tax revenue, while also supporting government efforts to reduce tobacco consumption, protect public health and strengthen revenue management.