Edible oil importers not benefitting from VAT cuts
Recently, VAT on edible oil was slashed by 15% at the production level, 5% at the consumer level, and 10% at the import level
The importers and refinery companies of edible oils are not getting the benefit of the government's recent value added tax (VAT) cuts due to technical complications.
The government has reduced the VAT on edible oil by 15% at the production level, 5% at the consumer level, and 10% at the import level in an effort to stabilise the market.
But fresh oil imports are still being taxed according to the previous VAT structure at the time of unloading.
Asked, City Group Director Biswajit Saha told The Business Standard, "The consignments that are being unloaded now have been imported under Letters of Credit (LCs) opened more than two months ago, and the VAT structure was different then."
"The production cost of edible oils remains high as the National Board of Revenue (NBR) is charging VAT on imported oils as per the previous structure," he said.
The refinery companies said the NBR has issued separate Statutory Regulatory Orders (SROs), reducing VAT in different amounts in three stages of edible oil import, production, and consumption.
The three SROs were issued on 14 and 16 March but the products being unloaded now were booked prior to these SROs.
At the time of opening LCs, the companies paid 15% VAT on imports to the NBR. The NBR later issued an SRO setting the VAT at 5%, and companies should be able to avail that rate when unloading their goods.
In other words, the companies should get a refund of the additional 10% they paid which was later slashed by NBR.
But the NBR is not making the refund and has instead argued that importers have to pay VAT at the previous rate when the LCs were opened.
Due to the complex nature of this issue, edible oil importers and refineries submitted a letter to the Ministry of Commerce.
The ministry then directed the Bangladesh Trade and Tariff Commission to resolve the issue. The commission recently sent a letter to the NBR in this regard.
According to the letter, in order to keep the price and supply of edible oils stable, the commission urges the NBR to release edible oil import consignments on the current 5% VAT.
Instructions were also given in the letter for a refund of 10% VAT to those who have already paid 15%.
Importers and refiners say the new LC consignments will not arrive in the country right now and may take another month and a half, but the previously ordered products that are being redeemed now should be included under the VAT reduction SRO and the NBR should refund the additional amount that has been paid.
But if the NBR does not return the money, then there will be no scope to reduce the production costs of edible oils, they said.
A soybean oil importing official said on condition of anonymity, "According to the law, we must get back 10% of the 15% VAT that we paid on imports at the time of unloading."
"Because, the government issued a 5% import duty SRO before the goods were unloaded. If we do not get this facility, it will not be possible to provide low priced soybean oil in the market and the government's initiative to stabilise the market will be thwarted," he added.
Earlier, in the wake of rising oil prices in the international market, businesses had sought to increase the price of soybean oil by Tk12 per litre at the end of February, but the commerce ministry stopped that.
This was followed by instability in the cooking oil market, with refiners cutting supplies and syndicate wholesalers raising prices.
The situation took its worst turn when oils disappeared from the market altogether. Retailers who had stock sold oil for Tk180-190 against its regular price of Tk168 per litre.
To bring stability to the market, the government then withdrew the 5% VAT at the consumer level, 15% at the manufacturing stage, and finally reduced the VAT from 15% to 5% at the import stage.
Later, the government also set the prices of soybean and palm oils but the new prices have not yet been implemented across the country.
According to the new price, soybean oil should be Tk160 per litre, loose soybean Tk138, and a five-litre bottle, Tk760. In another phase, the price of palm oil was reduced to Tk130 per litre.
However, the market analysis data of the Trading Corporation of Bangladesh (TCB) on Saturday showed that loose soybean is selling for Tk155-160 per liter, a one-litre bottle is Tk160-165, and palm oil is selling for more than Tk145 per liter. Only five-litre bottles are going for Tk740-760.
