Edible Oil: Exemption of VAT likely

The government is likely to waive VAT on edible oil to prevent the risk of price hike of the essential cooking ingredient by dishonest traders when new laws come into effect from July this year, a senior official of the Finance Ministry said yesterday.

The move comes in the face of worries among consumers that implementation of the new VAT law will fuel a hike of living costs because of implementation of a uniform 15 percent VAT instead of the multiple rates applicable now to many goods and services.

At present, a VAT of 15 percent is collected on import of raw and refined soybean, palm and other types of vegetable oils. But this tax is waived on processing or production stage making it difficult for importers to claim rebate, revenue officials said.

“We plan to place the proposal of exempting VAT on edible oil to hand relief to common people. This move will also reduce scope for unscrupulous traders increasing prices of some essentials,” said the official, preferring anonymity.

Revenue officials say price of cooking oil should decline once VAT exemption is implemented as importers and refiners fix prices by adding the VAT as cost.

Officials said businesses will be able to get rebate for application of 15 percent VAT, as envisaged in the VAT and Supplementary Duty Act 2012, in the whole value chain. Despite the rebate, the burden on consumers may increase marginally.

Meanwhile, officials also warned that dishonest traders may hike some prices cashing in on imposition of VAT across the board.

Earlier, the National Board of Revenue (NBR) said the government is considering steps so that prices of essential commodities as cooking oil do not rise.

The official said VAT collection from edible oil at import stage will not be more than Tk 30 crore.  So the waiver will not affect revenue to that extent.

The NBR has also prepared a list of VAT-free goods and services to be made public. 

This list of VAT-free products would be hung in front of shops, officials said.

The new law keeps essential commodities, agricultural products and life-saving drugs, medical services and healthcare, newspaper printing, publication and distribution and education exempt from VAT.

Bangladesh, with its 16 crore population and rising industrial demands, consumed 2.33 million tonnes of vegetable oil in the 2015-16 fiscal, up 11 percent year-on-year, according to the US Department of Agriculture.

Total consumption is expected to rise to 2.57 million tonnes during the current fiscal year, according to the USDA.  Bangladesh has to meet nearly 90 percent of its annual requirement of oil through imports from Malaysia, Indonesia, Brazil and Argentina.