The National Board of Revenue has rejected a power, energy and mineral resources ministry’s request to exempt Petrobangla from paying value-added tax on import of liquefied natural gas.
VAT wing of the NBR on January 17 in a letter to the Energy and Mineral Resources Division of the ministry said that there was no scope for giving VAT exemption to Petrobangla on LNG import as the indirect tax was imposed through budgetary measures under the VAT and Supplementary Duty Act-2012.
The ministry sought exemption from payment of VAT on LNG import as per a request made by the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) after the revenue board denied accepting its VAT rebate claims.
Petrobangla also requested the NBR either to entertain VAT refund claims or offer VAT exemption on import of the product.
Earlier on December 7, the NBR in a clarification said that Petrobangla would not be able to get VAT rebate on paid VAT at the import stage on import of LNG as the state-run corporation was claiming huge amounts of rebate every month from the large taxpayers’ unit of the NBR.
The revenue board denied the rebate claims saying that it was not legal due to the difference in the VAT rates at the import and local supply stages.
Petrobangla claimed rebates worth Tk 3,104 crore for the period between January 2019 and September 2020 from the LTU (VAT).
According to the NBR, the import price of LNG stands at Tk 31.53 a cubic metre.
As per documents submitted to the LTU (VAT) by Petrobangla, the amount of value addition is Tk 4.45 a cubic metre. The VAT at 15 per cent on import price and value addition stands at Tk 5.73.
But Petrobangla sells per unit of compressed LNG at subsidised rates of Tk 4.45 per unit on the local market and pays Tk 0.55 in VAT on the sales price.
Although the VAT rate is also 15 per cent on local sales, the actual VAT rate stands at 1.54 per cent due to sales of the item at a lower price compared with the import price.
The payable VAT by Petrobangla becomes negative Tk 4.17 a unit if the rebate is entertained.
As per law, VAT rebate is applicable only if the VAT rate remains 15 per cent at all stages of the supply chain.
In the case of Petrobangla, the VAT rate becomes lower than 15 per cent due to sales of the product at a price lower than the imported price, NBR officials said.
Following the NBR clarification, Petrobangla sought the exemption from payment of VAT to comply with the existing VAT law.