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Government Revenue Loss due to the Sugar Tax Cut

The Special Commodity Levy (SCL) on imported sugar was reduced from LKR 50/kg to LKR 0.25/kg on the 13th of October 2020. This was intended to reduce the price of sugar in the domestic market. However, as global prices also increased, the reduction in the levy did not have the desired effect on the domestic market price. The reduction in the levy did however result in substantial tax revenue being lost. The cumulative loss of government revenue was over LKR 28 Bn as of August 2021 as a result of the sugar tax change.

The rapid rise in quantities of imported sugar prompted the government to suspend import licenses for sugar on the 22nd of May 2021. The subsequent months saw relatively lower import quantities compared to average monthly imports of MT 56,200 during the period of October 2019 – September 2021.


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