The Ministry of Power, Energy and Mineral Resources has recommended reducing value-added tax (VAT) on liquefied petroleum gas (LPG) imports to below 10% by reinstating a 15% VAT exemption at the import stage.
In a letter sent to the National Board of Revenue (NBR), the ministry stated that the Advisory Council had agreed to reinstate the 15% VAT exemption at the import stage, impose VAT at a rate below 10%, and withdraw the existing 7.5% VAT applied at the local production stage in order to ensure a stable supply of LPG in the domestic market.
The ministry urged the NBR to take the necessary steps to implement these measures. The letter noted that LPG prices had recently become volatile, prompting the government to review and restructure VAT and tax rates at both the import and local production levels. It added that initiatives had also been taken to simplify procedures for opening bank loans and letters of credit for LPG imports.
The energy ministry further requested the NBR to consider restructuring the tax framework by recognising LPG as a green fuel in light of prevailing market conditions.
According to the letter, approximately 98% of the country’s total LPG consumption is supplied through private-sector imports. Demand for LPG typically rises during the winter season, while supply declines both internationally and domestically during the same period, exacerbating market pressures.
The matter was discussed at an Advisory Council meeting held on 18 December, where issues raised by the energy division were reviewed. The letter described the proposal to reinstate the 15% VAT exemption at the import stage, impose a reduced VAT rate of 10%, and exempt VAT and advance tax at the local production stage as timely.
However, it was also emphasised that a detailed assessment should be conducted to determine the extent to which the proposed tax adjustments would translate into price reductions for consumers. To this end, the energy division, the commerce ministry and the internal resources division were instructed to undertake a coordinated review.
The letter further noted that members of the LPG Operators Association of Bangladesh (LOAB) had called for a zero% VAT rate at the import stage, rather than the proposed 10%.
Subsequently, the decision taken at the Advisory Council meeting was presented at a separate meeting with leaders of the LPG Operators Association.
