A tax-reform package for imported LNG has been prepared to help reduce state subsidy burden being created through multiple taxation and marketing the item at cut rates.
To reduce its burden from gas subsidies, officials say, the state-owned Petrobangla has proposed a set of tax reforms on the import of liquefied natural gas (LNG) to be ratified in the upcoming budget for the fiscal year 2025-26.
The proposals were placed at a meeting held at the Ministry of Power, Energy and Mineral Resources for further consideration and necessary action.
Currently, LNG imports are subject to 15-percent VAT at both the domestic supply and import stages, along with a 2.0-percent Advance Income Tax (AIT).
A senior official at Petrobangla says the state corporation is unable to adjust the import-stage taxes against its actual payables because it sells gas at a price much lower than the import and blending costs.
"We have been urging the National Board of Revenue (NBR) to reduce the VAT on LNG imports," the official told the FE.
The other proposals include facilitating duty-free import of equipment for LNG terminals, extending the timeframe for duty payments from six months to 12 months, reducing taxes for gas-supply companies, offering tax-breaks for new LNG- terminal investors.
At present, Petrobangla sells blended gas-- a mix of locally produced gas, IOCs-supplied gas, and imported LNG-- at a subsidized rate of below Tk 23 per cubic meter. However, the actual cost of import and blending, including taxes, stands as high as between Tk 70 and Tk 75 per cubic meter.
"Several meetings have been held on this issue. The 15-percent VAT at the end-user level is acceptable," he added.
"But the problem is at the import stage, where Petrobangla also pays 15-percent VAT along with 2.0-percent AIT. Since we sell gas at a subsidized rate, we cannot adjust the import-stage VAT with the end-user VAT, which adds up to our financial burden."
In response, a senior customs official has acknowledged that Petrobangla has long struggled to pay the VAT at the import stage, resulting in a growing amount of dues.
As of December 2024, Petrobangla owed Tk 183.67 billion in taxes related to LNG import.
According to ASYCUDA data from customs, the NBR is owed Tk 147.13 billion in import-stage taxes on LNG over the last three fiscal years. Of this, Tk 129.82 billion is on account of unpaid 15-percent VAT at the import stage.
Petrobangla officials argue that there is no value addition in the LNG-supply process due to the subsidized pricing model.
The entity has also proposed waiving taxes on the depletion allowance, which cost Petrobangla Tk 2.44 billion in tax payments in the 2023 calendar year. Under the Production Sharing Contract (PSC), Petrobangla is responsible for paying all taxes on behalf of the international oil companies (IOCs) producing gas in Bangladesh and supplying to the national grid. As of February 2025, US oil -giant Chevron alone had dues worth $167.93 million from Petrobangla.
For FY2024-25, 96 LNG cargoes are expected to be imported, with a price gap of Tk 140.0 billion, according to Petrobangla data.
Of this, the Ministry of Finance is expected to provide Tk 65 billion in subsidies, while Petrobangla will have to shoulder the remaining Tk 75.01 billion which it is unable to pay.
Currently, the two existing LNG terminals at Moheshkhali enjoy tax-breaks on their investments. Petrobangla has sought similar incentives for upcoming LNG-infrastructure investors.
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