The National Board of Revenue (NBR) cut the much-discussed Value-Added Tax (VAT) on edible oil in Bangladesh at the import level to 5% from 15% on Wednesday, but the question now is how much relief the end consumers will receive as a result of the exemption.
Previously, the government removed VAT from other levels – production and supply – in a “futile attempt” to lower edible oil prices in the market, according to providers, because the value-added of the basic commodity at those levels and subsequent VAT was little.
Officials from two of the country’s largest edible oil supplying companies explicitly stated that a reduction in VAT at the import level would significantly reduce prices, based on data.
All of the suppliers agreed with them and pushed the government to lower the import-level VAT, which the NBR did quickly. There is now no VAT on edible oil at the production and supply levels, with the exception of a 5% import tax.
The Business Standard attempted to speak with officials from the main suppliers to learn about the market’s reaction to their projections after their demand was met, but despite many attempts, they did not even receive phone calls until the report was filed.
According to one of the authorities, the total VAT on edible oil was around Tk28 per litre at the time of booking. According to the NBR, the new waiver decreased the VAT to around Tk6 per liter, resulting in Tk22 savings for customers.
A shift in the global edible oil markets would also affect the VAT rate and edible oil pricing.
Meanwhile, consumers have urged the trade ministry to ensure that the VAT exemption benefits them and to take a firm stand against any irregularities in the edible oil industry.
“We find that when a reason for a price increase arises, businesses raise the price immediately, but they do not do so when the price is reduced,” Fazlee Shamim Ehsan told The Business Standard.
“In commodities markets, we want rationality and justice,” he added.