Govt cuts VAT on LP gas to keep it affordable for consumers
A 12kg cylinder currently priced at Tk1,206 could fall by Tk15 due to VAT reduction
The government has partially reduced value-added tax (VAT) on liquefied petroleum (LP) gas, aiming to stabilise prices of the essential fuel used in households and industry while keeping it affordable for consumers.
In a notification issued yesterday (17 February), the National Board of Revenue (NBR) has now scrapped VAT at the production and trader stages as well as the advance tax at import, replacing them with a single 7.5% VAT levied only at the import stage.
Under the previous system, LP gas faced 7.5% VAT at both the production and trader levels, alongside a 2% advance tax at the import stage.
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The tax authority said the measure — effective until 30 June — was taken in the public interest to help stabilise LP gas prices and maintain them within consumers' purchasing capacity.
The notice stated that the government has decided, in the public interest, to partially reduce VAT on LP gas to stabilise the market price of this essential product used in industry and households and keep it within consumers' purchasing capacity.
The decision followed an application from the LPG Operators Association of Bangladesh and recommendations from the Ministry of Power Energy and Mineral Resources.
According to the NBR, the revised structure will reduce the overall VAT burden on consumers by around 20% compared with the previous system. Industry entrepreneurs say the change could translate into a modest drop in market prices.
Speaking on condition of anonymity, the chief financial officer of a leading LP gas supplier said a 12kg cylinder currently priced at Tk1,206 could fall by about Tk15 due to the VAT restructuring.
Officials maintain the tax adjustment will not hurt government revenue. An NBR official explained that compliance gaps in the LP gas supply chain had allowed some operators to evade VAT, particularly because advance tax at import was rebateable.
By shifting VAT collection to the import stage, authorities expect to reduce evasion — potentially maintaining or even increasing revenue collections.
