Staff Correspondent:

The National Board of Revenue (NBR) has moved to simplify the taxation process for Liquefied Petroleum Gas (LPG) by proposing a 10% Value Added Tax (VAT) levy at the import stage, simultaneously exempting VAT currently imposed across various local production and trading levels to combat tax evasion.

Internal Resources Division sources confirmed that a proposal regarding the NBR’s initiative – which will waive the current 7.5% VAT on local LPG production, VAT on trading, and Advance Tax (AT) – is being placed before the Advisory Council meeting today for approval, following which a gazette notification will be issued.

NBR officials said that the main objective is to introduce transparency and reduce revenue leakage by abolishing the multi-stage local VAT collection process in favour of a single point of collection at the import level. Currently, LPG is exempt from VAT at the import stage, although a refundable advance tax is payable.

Two NBR VAT department officials, speaking to journalistson condition of anonymity, confirmed that the total VAT currently collected across all local value-addition stages is roughly equivalent to the newly proposed 10% import VAT.

“The new VAT structure should not add any extra cost to consumers,” an official said, adding, “However, due to a reduction in the current non-compliance gap, the government’s revenue collection is likely to increase.” The NBR currently collects approximately Tk700 crore annually from the sector.

The official explained the rationale for the change: “The current multi-layered VAT and refund system involving a handful of companies has compliance issues. Specifically, it is difficult to accurately determine the value addition at the local stage. The government has taken this initiative to simplify the VAT collection process in this sector.”

MARKET IMPACT AND SUPPLY

The NBR officials said that the change in the rate and method of VAT collection will not increase the price of LPG for consumers, as the overall revenue burden remains the same. They suggested that the reduced total cost for importers due to simplified compliance could potentially allow businesses to offer a price reduction to customers.

Bangladesh’s monthly demand for LPG stands at around 1,00,000 to 1,50,000 tonnes, with usage rising due to declining domestic gas production and a halt to new pipeline gas connections for households. Industrial use has also increased amid irregular gas supply. About 98% of total demand is met through imports, mainly from Qatar, Kuwait and Iran.

Nearly 81% of LPG supplied in the country is used for household purposes, primarily as cooking fuel, while the remainder is consumed by industrial, commercial and transport sectors, including auto gas.

The Bangladesh Energy Regulatory Commission (Berc) sets LPG cylinder prices on a monthly basis, depending on demand and international market trends. The current price of a 12kg LPG cylinder is Tk1,253.

VAT officials said the revised system would reduce overall costs for importers, potentially allowing businesses to pass on some benefits to consumers through lower prices. Industry stakeholders have welcomed the move.

The LPG Operators Association of Bangladesh has welcomed the initiative. Mohammad Amirul Haque, president of the association, told journalists, “Collecting VAT at the import stage removes the hassles of local collection, making it easier for the government and reducing accounting complexities for businesses.”

He added, “It will also curb uneven trade, as inconsistencies in the local VAT accounts of a few non-compliant companies often lead to accusations of evasion across the entire sector.”