Locally made LPG cylinders get yourself a cut in VAT
The earnings authority has reduced value added tax (VAT) on locally made cylinders for storing liquefied petroleum gas (LPG) as a way to allow domestic manufacturers to raised contend with imported cylinders and enable users to cover bottled gas.
The VAT rate for locally-made LPG cylinders has been slashed to 5 % from 15 per cent, the National Board of Revenue (NBR) said in a notice issued towards the end of last week.
The benefit will stay effective until June 30, 2021, the NBR added.
The move follows pleas from domestic manufacturers of LPG cylinders following the government imposed 15 % VAT on local manufacturing right from the start of fiscal 2020-21 in July.
Before last fiscal year, there was no VAT on locally made LPG cylinders.
Azam J Chowdhury, chairman of the East Coast Group, which has an LPG cylinder production plant, said imports became cheaper than local cylinders after the imposition of 15 % VAT.
"We demanded that the government ensure parity with imported ones. Following a move, local industries are certain to get some advantage," he said.
Omera Cylinders is a concern of East Coast Group.
Bangladesh has 11 companies generating LPG cylinders and their combined production capacity is 85 lakh units whereas the annual requirement is 65 lakh units, according to Chowdhury, also president of the LPG Operators Association of Bangladesh.
"This is much industry and given the prevailing capacity, you don't have to import. We may also be able export LPG cylinders abroad through value addition," he said.
In recent years, local manufacturing of LPG increased as more companies joined the foray to profit from the growing demand for bottled gas for cooking and small industries because of the fast-depleting reserves of gas, unavailability of firewood, rising income of consumers and rapid urbanisation.
Bangladesh now annually uses 10 lakh tonnes of LPG.
A decade ago, in '09 2009, LPG use was just below 50,000 tonnes, in line with the energy and mineral resources ministry and different industry operators.
Currently, two dozen companies are operating in the bottled gas business, mainly by importing LPG.
A section of operators also import LPG cylinders. However, the number of imports declined recently.
Data from the Department of Explosives showed that LPG cylinder imports dropped 44 % to 22.30 lakh units in fiscal 2018-19 from 39.60 lakh units the previous year.
The number of locally made cylinders marketed increased 85 % to 20.30 lakh units in fiscal 2018-19 from 11 lakh units the prior year, says data from the explosives department.
