There are plans to seek cabinet approval to remove the value-added tax (VAT) on brown sugar made at Lanka Sugar, a state enterprise made from firms, including then listed Pelwatte Sugar, expropriated during a Rajapaksa administration in 2011.
Moneragala MP R. M. Jayawardhana informed Parliament that unsold sugar stocks are stuck at Lanka Sugar’s Pelwatte and Sevenagala plants.
Currently, Sri Lanka imposes an 18% VAT on brown sugar produced at Lanka Sugar, but imported white sugar is not subjected to VAT, according to Industries Minister Sunil Handunetti. Additionally, the brown sugar produced by the state-owned enterprise is also subject to a 2.5% social security levy.
“As a result, brown sugar costs about 300 rupees a kilo when it comes out of the factory, compared to 220 rupees for imported white sugar,” Minister Handunetti explained.
To clear the stock, Handunetti emphasized the need for a tax concession and stated he plans to submit a proposal to the cabinet to lift the VAT on brown sugar.
The situation has reached a point where the factory cannot continue operations, he added.
During the Rajapaksa administration, two sugar factories were expropriated—one owned by Distilleries Corporation and another privatized and later controlled by Daya Gamage, an opposition supporter.
