Advisory Council approves 7.5% VAT waiver on domestic LPG

To ease the tax burden on liquefied petroleum gas (LPG), the Advisory Council has approved a proposal to waive the 7.5% VAT and 2% advance tax imposed at the local production and trader levels, retaining only a 7.5% VAT at the import stage.

As a result, business costs related to gas supply in the domestic market are expected to decrease, which may also have an impact at the consumer level, said Shafiqul Alam, press secretary to the chief adviser.

He shared the information at a press conference held at the Foreign Service Academy in the capital today (5 February) following the weekly meeting of the Advisory Council.

"This decision will somewhat reduce the overall tax burden on LPG, and that is expected to influence prices in the local market," he said.

With no access to natural gas connections, more than 40% of households in the country rely on LPG for cooking. Particularly in rural and semi-urban areas, LPG has effectively become the only available fuel alternative.

However, in recent years, LPG prices in the country have increased multiple times due to fluctuations in the international market, dollar shortages, and a high tax structure.

Amid supply shortages, a Tk1,250 cylinder has reportedly been sold for as much as Tk2,500.

LPG importers and traders had stated that VAT and advance tax at the local production and trading stages were increasing the effective tax burden, which ultimately placed pressure on consumers. Industry stakeholders had long been demanding a rationalisation of the tax structure.

Amirul Haque, president of the LPG Operators Association of Bangladesh (LOAB), said that the exemption of VAT and advance tax at the local production and trader levels is expected to reduce import and distribution costs.

"If companies' operating expenses decline, the benefit may gradually be reflected in retail prices," he added.