The locally made liquor and imports are taxed on an unequal footing that the International Monetary Fund (IMF) has described as unusual, with the excise on the local liquor nearly doubling since 2019, while the excise on the imported spirits, wine and beer has stayed frozen, the official and industry data showed.
In a report published by the Finance Ministry on October 30, the IMF noted that the imported alcoholic beverages carry a lower fixed excise rate per litre than the domestic products.
“This differential treatment is unusual, as the imported and domestically produced excise goods are typically subject to equivalent excise rates to protect revenue, support neutrality and reduce opportunities for arbitrage,” the report stated.
The excise on the locally made spirits has risen to Rs.7,969 per litre of alcohol, from Rs.4,150 in 2019, while the duty on the local strong beer has climbed to Rs.6,015, from Rs.3,200 and on local wine to Rs.5,735, from Rs.3,200, as per the industry data. The increases came through near-annual revisions, the latest in January 2025.
However, the excise on the imported liquor has not changed since Excise Notification No. 08/2019 of December 2019. That notification roughly tripled the duty on the imported whisky, rum and brandy to Rs.650 per bulk litre and set Rs.600 for gin and vodka, Rs.230 for wine and Rs.135 for beer. The customs import duties of Rs.2,750 per litre on spirits, Rs.440 on wine and Rs.550 on beer have also stayed unchanged since at least 2021, as per the Customs tariff guides.
The imported liquor is taxed through two channels. The importers must pay the per-litre excise to the Excise Department, under a permit process set out in the 2019 notification before Customs can release a consignment. Customs separately collects the import duty, a 10 percent Ports and Airports Development Levy (PAL), a 70 percent cess on spirits, 18 percent VAT and the 2.5 percent Social Security Contribution Levy.
The border charges have in fact eased since 2023. A 100 percent surcharge on the customs duty, which applied to the imported beer, wine and spirits in 2022 and early 2023, has been absent from the tariff schedule since 2024, effectively halving the customs duty on the imported liquor.
On a 750ml bottle of 40 percent whisky, the local excise now works out to about Rs.2,391, nearly five times the roughly Rs.488 in excise on an imported bottle. The imported bottle also pays about Rs.2,063 in customs duty, down from about Rs.4,125 while the surcharge applied.
According to the industry data, a 750ml bottle of imported whisky now sells for about Rs.8,000, down from Rs.11,500 in 2022, while a local premium whisky has risen to about Rs.5,500, from Rs.3,850. That has narrowed the price gap between the two by about two-thirds.
The lapse of the surcharge and a firmer rupee help explain the fall. The currency depreciated 44.8 percent against the US dollar in 2022, before recovering to Rs.332.61 by end-October 2026, from around Rs.363 at end-2022, as per the Central Bank data, although it has weakened by 6.8 percent this year. The industry estimates nevertheless warn that the imported spirits such as whisky and gin could soon become cheaper than the locally made whisky.
The border levies separating the two could shrink further, as the Medium-Term Revenue Strategy (MTRS) objectives commit to phasing out the para-tariffs, which the IMF identifies as the Special Commodity Levy, PAL and cess. Unless replacement measures are introduced, that would remove the cess on the imported spirits and the PAL on all imported liquor.
The three levies accounted for about 17 percent of Rs.1,528 billion collected by Customs in the first seven months of 2026, as per the Treasury data.
The IMF urged the MTRS to assess bringing the imported and local alcohol onto a more neutral rate basis, while the MTRS objectives pledge a review of alcohol excise and appropriate indexation of specific rates.
The local manufacturers have pressed the Treasury since January to raise the import levies in line with the local excise increases, Mirror Business learns. Such a move would lift the excise on the imported whisky to about Rs.1,248 per bulk litre and on the imported beer to about Rs.254.
Meanwhile, Sri Lanka Excise expects the licensed liquor production to return to around its 2022 high of 43.3 million absolute litres this year, crediting a reduction in the illegal products. The excise duty on liquor rose 27 percent to Rs.137.5 billion in the first half of 2026, from Rs.108.2 billion a year earlier, as per the Treasury data.
The IMF also noted that splitting responsibility between the Excise and Customs departs from common international practice, where “customs generally administer excise on imports” and proposed a time-bound review of a possible the customs and excise model. An industry expert similarly noted that the imported alcohol would ideally be taxed entirely through customs.
