Top officials of privately-owned LPG companies are worried that if the 15% VAT rate is imposed on liquefied petroleum gas (LPG), sales of LPG cylinders will go down and LPG prices will go up, affecting both the companies and the consumers.
Currently, there is no VAT on the import of LPG, but there is a 15% VAT on the tariff value, which is quite low, a source in the National Board of Revenue (NBR) told the Dhaka Tribune.
However, if the Value-Added Tax (VAT) and Supplementary Duty, 2012 comes into effect on July 1, a uniform 15% VAT will be imposed on the LPG products, cancelling the existing system, he added.
Sector insiders say this will significantly increase the LPG prices and create a burden on consumers.
The chief executive officer of a private LPG company explained: “Under the existing tax system, there is a Tk2.5 VAT on the purchase of 5-10kg gas cylinders, Tk9 on 11-30kg cylinders, and Tk18.75 on cylinders with the capacity of 45kg and more.
“However, under the new VAT law, with 15% VAT, the price of 5-10kg cylinders is estimated to be Tk454, which is Tk54 more than the current price, while the price of 11-30kg cylinders will be Tk1,021, which is Tk124 higher, and 31-45kg cylinders will cost Tk2,426, which is Tk300 higher,” he said, requesting anonymity.
The LPG Operators Association of Bangladesh has already sent a letter to the revenue authorities voicing their concerns and demanding that 15% VAT not be imposed on LPG, sources said.
“Of course, the price of LP gas will increase due to the new VAT rate. We hope the government will reconsider its decision so there is no negative impact on the consumers,” said Mohammed Saidul Islam, director and CEO of Laugfs Gas (Bangladesh) Ltd.
According to the latest gas price hike which became effective on June 1, a domestic user has to pay a monthly gas tariff of Tk900 for a single-burner stove and Tk950 for a double-burner stove. Meanwhile, a 12.5kg LPG cylinder produced by a private company costs Tk1,150-1,250.
Government-produced LPG cylinders come cheaper; a 12.5kg cylinder produced by the LP Gas Ltd, a subsidiary of Bangladesh Petroleum Corporation (BPC), costs Tk700.
However, users complained that BPC cylinders are rarely available in the market, which forces them to avail the cylinders produced by private companies.
According to the BPC, the national demand for LPG is currently one million tonnes, but only half of it is produced and supplied.
Aside from its own initiatives, the government has made the process of establishing privately-owned LPG bottling plants easier to increase the supply of LPG. Ten local and foreign companies are now producing LPG in the country.
Meanwhile, an NBR official said the market of LPG cylinders would remain stable even after the new VAT law is implemented if the government ensured stronger monitoring of the market.