The National Board of Revenue has lowered the value-added tax on local production of liquefied petroleum gas cylinders to 5 per cent from 15 per cent to facilitate local production and reduce dependency on import of the item.
The NBR’s VAT wing issued a statutory regulatory order on September 24 in this connection with immediate effect.
According to the SRO, the VAT waiver on domestic production of containers for compressed or liquefied gas, of iron or steel, will remain effective up to June 30, 2021.
Officials said that the revenue board had offered the waiver after receiving applications from the LPG Operators Association of Bangladesh seeking complete withdrawal of VAT on production of local LPG cylinders.
The sector will enjoy the VAT exemption till June 30, 2021 and the revenue board had imposed 15 per cent VAT on the sector in the budget for the current fiscal year 2020-2021.
Local producers had been facing stiff competition with imported LPG cylinders as imported LPG had become cheaper due to imposition of the VAT on local production, LOAB claimed.
The burden of VAT will ultimately be shifted to the consumers, making LPG gas costlier, it said.
NBR officials said that reduction of the VAT would encourage local production and give local producers a price advantage over imported LPG.
Currently, a total of 26.20 per cent duties and taxes, including 15 per cent VAT, are applicable on import of iron and steel‑made LPG cylinders.
There is, however, no VAT on import of glass-fibre made LPG cylinders.
Around 27 firms are now involved in the LPG business in the country and a number of them are also involved in the production of LPG cylinders.
Demand for LPG cylinders has been increasing over the last few years in the country due to a rise in the use of LPG in semi‑urban and rural areas in the absence of supply of piped natural gas and due to poor economic development in the areas.
According to LAOB, the annual local demand for LPG cylinders stands at 60 lakh while the annual production capacity of local companies is around 90 lakh.
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