The case for removing VAT on LPG
Cylinder gas has become the default fuel for millions, yet price hikes and VAT continue to squeeze household budgets already under strain
As inflation stands at 8.17%, the continued imposition of value-added tax (VAT) on liquefied petroleum gas (LPG) is placing a significant and unnecessary financial strain on end-users. With piped natural gas supplies shrinking, household and small-business dependence on LPG has surged.
This growing reliance, combined with a VAT that adds roughly Tk80 to every 12-kg cylinder, is intensifying the cost-of-living pressures already weighing heavily on millions.
The National Board of Revenue (NBR) currently charges 7.5% VAT on each 12-kg cylinder of LPG. Based on Bangladesh's average monthly consumption—equivalent to around 8 million cylinders—the total VAT collected amounts to roughly Tk640 million. This is an enormous burden for consumers to shoulder for a fuel that has become a basic necessity.
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LPG continues to gain popularity due to its clean-burning qualities, lower environmental impact, safety profile and ease of use, especially in areas where piped natural gas is unavailable. Its rapid adoption across households, small businesses and even parts of the transport sector underscores its importance as a practical, eco-friendly energy source.
Yet, in contrast to essential commodities such as rice, lentils, meat, fish and vegetables—which are entirely VAT-exempt—LPG remains taxed at 7.5%. The inconsistency is stark. For millions of families, especially those without access to piped gas, LPG is not optional; it is essential.
Earlier this month, the Bangladesh Energy Regulatory Commission (BERC) set the price of a 12-kg cylinder at Tk1,253 for December 2025, an increase of Tk38 from the previous month.
The pricing formula adjusts monthly based on the Saudi Aramco Contract Price (CP), exchange-rate fluctuations and VAT. Despite these adjustments, the embedded VAT of roughly Tk80 per cylinder persists—an amount disproportionately felt by low-income households.
Against a backdrop of rising food, transport and utility prices, the VAT on LPG is amplifying economic hardship. For families facing stagnant incomes, this tax is not merely a financial inconvenience; it is a structural obstacle to maintaining a basic standard of living.
Many developing nations, including neighbours, have introduced VAT exemptions or targeted subsidies on LPG to ensure affordable access to clean cooking fuel and reduce reliance on biomass. Bangladesh, too, would benefit from following this path.
Exempting LPG from VAT would support households and help small businesses cope with rising energy costs. It would also accelerate the transition away from polluting fuels such as kerosene, firewood and diesel—delivering long-term health, economic and environmental benefits.
Obaidur Rahman is the Managing Partner of C-Net (Consultant Network). Email: obaidur126@yahoo.com.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
