- Unsold stocks piled up at Pelwatte, Sevenagala Lanka Sugar plants
- 18% VAT for local brown sugar while imported white sugar is exempt from VAT
Cabinet approval will be sought to remove the Value-Added Tax (VAT) on brown sugar produced by Lanka Sugar, a state-owned enterprise formed through the expropriation of firms, including the previously listed Pelwatte Sugar, in 2011.
Unsold stocks of sugar remain stuck at the Pelwatte and Sevenagala plants of Lanka Sugar, Deputy Minister R. M. Jayawardhana, who raised the issue in Parliament said.
Industries Minister Sunil Handunnetti explained that Sri Lanka currently imposes an 18 percent VAT on brown sugar produced by Lanka Sugar, while imported white sugar is exempt from VAT. Additionally, brown sugar produced by the state-owned enterprise is subject to a 2.5 percent Social Security Levy. “As a result, brown sugar costs about Rs.300 per kilogram when it leaves the factory, compared to Rs.220 for imported white sugar,” Minister Handunnetti stated.
“To clear the stockpile, we urgently need a tax concession. I plan to present a proposal to the Cabinet to remove VAT on brown sugar. The situation has reached a point where the factory operations cannot continue.”
Under Sri Lanka’s Special Commodity Levy Act, certain essential food items are subject to a single tax instead of multiple import duties and VAT, which applies to white sugar. During the Rajapaksa administration, the two factories-one previously owned by the Distilleries Corporation and another privatised and controlled by former MP Daya Gamage were expropriated. Subsequently, taxpayer funds were injected to sustain the enterprise.
The Deputy Minister said that there are 1.5 million liters of ethanol stored at the Pelwatte Sugar facility.