The government is going to replace the existing duty on 13 petroleum products imported with a specific duty in the next fiscal year, amounting to a maximum of Tk13.75 per litre.
The specific duty would be Tk 13.75 per litre for 11 types of petroleum products, including kerosene, light diesel, motor spirit and jet fuel.
If put into effect, it will have a higher impact on retail price than the existing duty rate, which is 10% for 12 petroleum products, sources within the finance minister said.
The existing duty is 5% on petroleum oils and oils obtained from bituminous minerals, crude, which will be replaced by Tk1117 per barrel (Tk7.02 per litre). The specific duty of Tk9,108 per tonne (Tk9.10 per litre) has been proposed for furnace oil, which is now subject to a 10% duty.
The government also plans to withdraw the existing 5% advance tax on the import of 13 oil and petroleum products in the upcoming budget, which is expected to give people some relief from inflationary pressure, according to sources within the finance ministry.
Officials from the finance ministry have confirmed to The Business Standard that the removal of the advance tax will result in cheaper fuel oils, including crude oil, diesel, jet fuel, kerosene, and base oil.
But specific duty might limit the scope for consumers to benefit from global price fall, because, for example, Tk13.75 per litre duty will apply for kerosene no matter its global price falls or rise.
As per the commitments to IMF for its $4.7 billion loan package, the government will open energy prices to the market and phase out subsidies, which amounted to Tk23,000 crore in the revised budget for the current fiscal year and might go up to Tk34,000 crore in the next fiscal.
Currently, the prices of major fuel oils such as furnace oil, jet fuel diesel, and octane include a total of 34% government duties and taxes, comprising a 10% duty, 15% VAT, 2% advance income tax, and 5% advance tax. With the removal of the advance tax, the overall tax ratio on fuel oil prices will decrease to 29%.