Importers and refiners of edible oils are not benefiting from the government’s recent Value Added Tax (VAT) cuts due to technical complications.
The government has reduced VAT on edible oils by 15% at the production level, 5% at the consumer level and 10% at the import level in an effort to stabilize the market.
But imports of fresh oil are still taxed according to the old VAT structure at the time of unloading.
When asked, City Group Director Biswajit Saha told The Business Standard: “The shipments that are currently being unloaded were imported under Letters of Credit (LC) opened more than two months ago, and the structure VAT was then different”.
“The cost of producing edible oils remains high because the National Board of Revenue (NBR) charges VAT on imported oils under the previous structure,” he said.
Refining companies said the NBR had issued separate Regulatory Orders (SROs), reducing VAT by different amounts in three stages of edible oil import, production and consumption.
The three SROs were issued on March 14 and 16, but the products currently unloaded were reserved before these SROs.
When the LCs were opened, companies paid 15% VAT on imports to the NBR. The NBR then issued an SRO setting the VAT at 5%, and companies should be able to benefit from this rate when unloading their goods.
In other words, companies should get a refund of the extra 10% they paid which was then reduced by NBR.
But the NBR does not make the refund and instead argued that importers should pay VAT at the previous rate when opening LCs.
Due to the complex nature of this issue, edible oil importers and refiners sent a letter to the Department of Commerce.
The ministry then asked the Bangladesh Trade and Tariff Commission to resolve the issue. The commission recently sent a letter to the BNR in this regard.
According to the letter, in order to maintain the stability of the price and supply of edible oils, the commission urges the BNR to release import shipments of edible oils on the current 5% VAT.
Instructions were also given in the letter for a 10% VAT refund to those who have already paid 15%.
Importers and refiners say new LC shipments will not arrive in the country at this time and could take another month and a half, but previously ordered products that are currently refunded should be included in the VAT reduction SRO and the NBR should reimburse the additional costs. amount that has been paid.
But if the NBR does not return the money, there will be no opportunity to reduce the cost of producing edible oils, they said.
A soybean oil import official said on condition of anonymity: “By law, we have to recover 10% of the 15% VAT we paid on imports at the time of unloading.
“Because the government has issued 5% import duty SRO before the goods are unloaded. If we don’t get this facility, it won’t be possible to supply low price soybean oil on the market and the government’s initiative to stabilize the market will be thwarted,” he added.
Earlier, following rising oil prices in the international market, companies had sought to increase the price of soybean oil by Tk 12 per liter at the end of February, but the Ministry of Commerce stopped this.
This was followed by instability in the cooking oil market, with refiners cutting supplies and unionized wholesalers raising prices.
The situation took its worst turn when the oils completely disappeared from the market. Retailers who had stocks sold oil for 180-190 Tk against its regular price of 168 Tk per litre.
To stabilize the market, the government then removed VAT from 5% at the consumer level, 15% at the manufacturing stage, and finally reduced the VAT from 15% to 5% at the import stage.
Later, the government also set prices for soybean and palm oil, but the new prices have yet to be implemented nationwide.
According to the new price, soybean oil is expected to cost Tk 160 per litre, bulk soybeans Tk 138 and a five liter bottle Tk 760. In another phase, the price of palm oil was reduced to Tk 130 per litre.
However, market analysis data from the Trading Corporation of Bangladesh (TCB) showed on Saturday that bulk soybeans are selling at Tk 155-160 per litre, a liter bottle at Tk 160-165 and palm oil sells for more than Tk 145 per litre. liter. Only five-liter bottles go for Tk740-760.