The government has decided to restructure the taxation of liquefied petroleum gas (LPG), shifting the collection of value-added tax (VAT) from the local supply and trading stages to the import stage.
The move, aimed at reducing prices in the domestic market, was approved by the advisory council at a meeting on Thursday following a proposal from the National Board of Revenue (NBR).
Under the new structure, the existing 7.5 per cent VAT and 2.0 per cent Advance Tax on LPG at the local supply and trading stages will be waived, while a 7.5 per cent VAT will be imposed at the import stage.
Officials said a supply crunch of LPG, widely used as cooking fuel, has prompted the government to fast-track the decision ahead of the holy month of Ramadan.
According to the Bangladesh Energy Regulatory Commission (BERC) data, LPG imports in January fell by 21,000 tonnes, compared to December.
A senior NBR official said the tax rearrangement is expected to reduce the overall tax burden by about 20 per cent, which could, in turn, enable traders to lower prices for consumers.
"The NBR will issue a Statutory Regulatory Order (SRO) next week, and the revised tax structure will remain effective until June 30, 2026," the official added.
Azam J Chowdhury, chairman of East Coast Group and director of Omera LPG, said that taxes were not the primary reason behind LPG shortages or price hikes. Instead, he pointed to disruptions in supply chains.
However, he noted that the revised tax structure would lead to a marginal reduction in prices.
Mr Chowdhury, one of the country's largest LPG investors, also noted that the move would simplify VAT collection by consolidating tax payments at a single stage.
Industry insiders cited sharp increases in global LPG prices along with volatility in the Middle Eastern market as key factors complicating procurement. NBR officials said that determining the value addition at the local stage had become increasingly difficult, prompting the shift in tax collection.
The Ministry of Energy and Mineral Resources had earlier requested the NBR to reduce taxes on LPG to ease the financial burden on consumers. Bangladesh meets around 98 per cent of its LPG demand through imports, with household cooking needs accounting for the majority of consumption.
The NBR currently collects around Tk 7.0 billion annually from the LPG sector. Monthly LPG demand in the country ranges between 100,000 and 150,000 tonnes, rising steadily due to declining domestic gas production and the suspension of new household gas connections.
Industrial usage has also increased due to inconsistent pipeline gas supply. Imports mainly come from Qatar, Kuwait and Iran.
Around 81 per cent of the country's LPG consumption is used for household cooking, while the remainder is consumed by the industrial, commercial and transport sectors, including auto gas.
The BERC sets LPG cylinder prices monthly based on international market trends and local demand. The current official price of a 12kg LPG cylinder stands at Tk 1,253. However, retailers are charging an additional Tk 800 to Tk 1,000 per cylinder in the market.
More than 10 million consumers across the country rely on LPG.
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