VAT waiver on cooking oil eludes consumer

Despite the announcement of waiving value-added tax (VAT) on edible oil, refiners say the "misplaced measure" would not be able to rein in the spiralling prices.       

"The VAT withdrawal in two stages – production and retail – might save Tk6 or less in the end of a total Tk28 VAT per litre," said a refiner while talking to The Business Standard Thursday on condition of anonymity.

Finance Minister AHM Mustafa Kamal Thursday announced waiving 15% VAT on oil production and 5% at retail until 30 June to tackle the oil shock mostly stemming from a tight international supply.         

However, edible oil importers, refiners and traders had been requesting the government to withdraw 15% VAT on oil import, arguing VAT waiver in production and retail stages would not yield much in terms of market stabilisation.    

The revenue board did not issue any notification on Thursday despite the finance minister's announcement. Sources at the revenue board said the notification might be issued next week.

"If the revenue authorities issue the circular as the minister announced, it will be just an eyewash," the refiner claimed.

With at least five hikes in the past one year, soybean oil is as high as Tk190 per litre, though the government fixed the price at Tk168.

The essential consumer item has VAT slapped in three stages – 15% on import, 15% on production and 5% on retail. VAT in the import stage is crucial as production and trading do not hold much value addition, according to the sector people.

They said tight supply in the international market is the main reason for the price surge of the commodity in the local market. The revenue board realises 15% VAT on the spiked import price.    

Oil importers said edible oil was at $700 per tonne in the international market while the current rate is $2,000. Though the VAT slabs are unchanged, spiked import cost raises the amount of VAT on cooking oil.

Revenue board sources said the government earns Tk1,200 crore annually from VAT on cooking oil.

However, Didar-Mohd Dabirul Islam, head of finance & accounts at Bangladesh Edible Oil Limited, estimated that amount to already cross Tk2,000 crore.   

He too said VAT waiver on production and retail is not enough to stabilise the market.

AHM Mustafa Kamal Thursday also extended the reduced regulatory duty on sugar import for two and a half months.  

After the cabinet committee meeting on public purchase, he told the media that the government will buy oil, sugar, peas and lentils through the state-owned Trading Corporation of Bangladesh to check price hikes in upcoming Ramadan.       

He said the government approved purchases of 1.71 crore litres of soybean, 14,000 tonnes of sugar, 10,000 tonnes of peas and 19,500 tonnes of lentils at a total of Tk692 crore.      

BB eases commodity imports

Meanwhile, in view of soaring prices of essential food items, the Bangladesh Bank Thursday relaxed the guidelines for letter of credit (LC) margin for importing essential commodities allowing banks to open LCs at zero margin on the basis of bank-client relations.

Banks have been asked to keep margin at minimum rates for import LCs for edible oil, gram, pulses, peas, onion, date, sugar and fruits to check further hikes in prices of these items during the Ramadan. The directive will be in force for two months until 10 May this year.