Ministry proposes VAT cut to below 10% on LPG imports amid supply crunch

The Ministry of Power, Energy and Mineral Resources has recommended cutting value-added tax (VAT) on liquefied petroleum gas (LPG) imports to below 10 percent by reinstating a 15 percent VAT exemption at the import stage, aiming to ease the ongoing supply shortage.

In a letter sent to the National Board of Revenue (NBR) today, the ministry also recommended exemptions from the existing 7.5 percent VAT on local LPG production, VAT at the trader level, and advance income tax.

The ministry said about 98 percent of the country's LPG demand is met through imports by private companies, with usage spread across households and industrial sectors.

Supply typically tightens during winter, both globally and domestically, leading to price hikes, the letter said.

Demand also rises in winter due to comparatively lower supply of piped natural gas, further increasing reliance on LPG.

"These factors have resulted in an acute LPG shortage in the market, affecting daily life," the ministry said.

The letter noted that the issue was discussed at a meeting of the advisory council on December 18, where the Internal Resources Division considered it timely to withdraw the existing 15 percent VAT exemption at the import stage and impose a reduced 10 percent VAT instead, alongside exemptions at the local production and trading stages.

Following those discussions, and after consultations with leaders of the LPG Operators Association of Bangladesh (LOAB), the ministry formally placed the recommendations before the NBR, the letter said.

Meanwhile, LP Gas Traders Cooperative Society announced an indefinite countrywide strike from today in the marketing and supply of the fuel, demanding higher distribution and retail charges.