The Bangladesh Petroleum Corporation does not qualify for a VAT waiver on ingredients for liquefied natural gas (LNG) since Petrobangla subsidises imported LNG on the local market.
Though the new VAT law has provisions for a VAT waiver on imports, Petrobangla will have to pay Tk4.73 on imports and Tk0.55 on sales of each cubic meter of LNG.
According to this estimation, total VAT per cubic meter of LNG will be more than half of the sale price.
However, National Revenue Board (NBR) officials said this will not increase the price of gas at the consumer level.
The revenue board VAT wing, in a clarification Sunday, said that items with a specified VAT rate or with VAT rate below 15% will not qualify for the waiver. Therefore, there will be no VAT waiver on Petrobangla LNG imports.
Petrobangla imports each cubic meter of LNG at Tk31.53 while the 15% VAT on it is Tk4.73. After liquifying the gas, the corporation sells it at subsidised rate of Tk4.45. According to the revenue board, the corporation will have to pay 15% VAT, or Tk0.55 per cubic meter, even on the subsidised rate.
"According to the new VAT Act-2012, the import waiver does not apply if no value is added to the imported ingredients. Petrobangla converts LNG after import and sells it at a discounted price instead of value addition," NBR official Kazi Rezaul Hasan told The Business Standard.
However, he said that the VAT realisation will not affect the LNG price at the consumer level since the retail price is fixed and both NBR and Petrobangla are state-run agencies.
Earlier in 2018, NBR exempted Petrobangla from a 93% supplementary duty, 5% import duty and 5% advance income tax on LNG imports, continuing only 15% VAT. The exemption deprived the revenue board of at least Tk15,000 crore annually from the sector, said revenue board officials.
Petrobangla sources said that each cubic meter of LNG costs the government Tk35.40 including the import cost, shipping and tax while the sale price is Tk9.74.
Although the NBR has said there is no scope for a gas price hike at the consumer level as Petrobangla does not qualify for the VAT waiver, experts in this sector expressed concern that the people might have to bear some consequences in the end.
Consumers Association of Bangladesh (CAB) Energy Advisor Professor M Shamsul Alam said Petrobangla would certainly be able to supply the item at a lower rate if it could qualify for the waiver. Government subsidies in this sector will have to be raised further to keep the price at the consumer level unchanged.