KUALA LUMPUR, Nov 6 ― The government will be freezing the issuance of import licence for cigarettes and impose an excise duty on electronic, non-electronic cigarette devices and vape liquids beginning January 2021.

In his Budget 2021 speech, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz also said the government will tighten the licence renewal for importing cigarettes by revising the licence terms including introducing an import quota.

"The government will also impose excise duty at a rate of 10 per cent ad valorem on all types of electronic and non-electronic cigarette devices including vape effective January 1, 2021.

"E-cigarette liquids will also be subjected to excise duty at the rate of RM0.40 per ml,” he said in his speech.

The term "ad valorem” is Latin for "according to value,” which means that it is flexible and depends on the assessed value of an asset, product or service.

He also said the government will be making cigarettes and tobacco products as taxable goods on all duty-free Islands such as Labuan, Langkawi, Tioman, and Pangkor, and any free zones that have been permitted retail sale of duty-free cigarettes.

Tengku Zafrul’s announcement comes amid the government’s effort to ensure its revenue sources remain sustainable and able to finance the administration’s expenditures, especially it’s operating expenditures.

"At this moment government revenue is around 15 per cent of the gross domestic product (GDP) including petroleum-related revenue of around three per cent,” he said.

Apart from freezing the issuance of new tobacco import licences, Tengku Zafrul also said the government would be limiting trans-shipment activities involving tobacco to several dedicated ports in the country. 

"The government will also be imposing taxes on drawbacks on all imported cigarettes for the purpose of transshipment and re-exportation.

"The government will also disallow trans-shipment of cigarettes and re-export of cigarettes by small boats including ‘kumpit’ boats and instead be allowed only in intermodal containers,” he said.