Energy ministry proposes to reduce VAT on LPG imports to below 10pc

The Ministry of Power, Energy and Mineral Resources has proposed reducing value-added tax (VAT) on liquefied petroleum gas (LPG) imports to below 10 percent by reinstating a 15 percent VAT exemption at the import stage.

In a letter sent to National Board of Revenue (NBR), the ministry said the Advisory Council agreed to restore the VAT exemption on LPG imports to ensure a stable supply in the domestic market.

The proposal also includes exempting LPG from the existing 7.5 percent VAT imposed at the local production stage.

The ministry noted that LPG prices have recently become volatile, prompting the government to review VAT and tax structures at both the import and production levels.

Measures have also been taken to simplify procedures for opening bank loans and letters of credit (LCs) for LPG imports.

The energy ministry urged the NBR to restructure the tax framework by considering LPG a “green fuel” in light of the current market situation.

According to the letter, around 98 percent of the country’s LPG supply is imported by the private sector. Demand typically rises during the winter season, while both international and domestic supplies tend to decline.

The issue was discussed at an Advisory Council meeting held on December 18, where participants agreed that withdrawing the earlier VAT exemption and imposing a 10 percent VAT at the import stage; while exempting the 7.5 percent VAT, VAT and advance tax at the local production stage, was a timely proposal.

However, the council emphasized the need for a detailed analysis to determine how much the proposed tax changes would reduce LPG prices at the consumer level before implementation.

As a result, the energy division, commerce ministry, and internal resources division were instructed to conduct a coordinated review.

Meanwhile, members of LPG Operators Association of Bangladesh (LOAB) called for a zero percent VAT on LPG imports instead of the proposed 10 percent.

The decision taken at the Advisory Council meeting was later shared with LOAB leaders at a separate meeting.