Commerce ministry for extending edible oil VAT waiver

Considering high edible oil prices in the global market, the commerce ministry has recommended the National Board of Revenue (NBR) extend the existing VAT waiver on the essential commodity till June 30 next year.

It said this was needed to stabilise the edible oil supply chain and prices in the local market. On June 21, the ministry wrote a recommendation letter to the NBR chairman, saying there was no sign of stability in soybean and palm oil prices in the international market.

Besides, the World Bank and the World Food Programme forecast essential commodity prices would not become stable shortly. That is why the ministry thinks the current VAT waiver on edible oil should be extended, the letter said.

On March 14, the NBR issued a statutory regulatory order (SRO), waiving edible oil VAT at both production and trading stages to stabilise the local market. It issued another SRO on March 16, reducing VAT on edible oil imports from 15 per cent to 5 per cent. Both SROs will expire on June 30.

The government increased bottled soybean oil prices by Tk 47 to Tk 207 per litre in two phases since May, citing high prices in the international market. It did so despite providing the VAT waivers.

Soybean and palm oil prices are showing a downtrend in the international market. But there is still no sign of prices going down in the country.

Currently, per litre bottled soybean oil is sold at Tk 207, a five-litre soybean oil bottle at Tk 997, per litre non-bottled soybean oil at Tk 185, and per litre palm oil at Tk 158. Edible oil prices have been going up since the coronavirus pandemic struck, and the government has gradually increased soybean and palm oil prices in the local market. The Russian invasion of Ukraine disrupted the global edible oil supply chain, causing per tonne soybean oil prices to increase overnight.

At a time when the world was facing an edible oil crisis, the world’s largest palm oil producer, Indonesia, banned palm oil exports on April 28, worsening the crisis and causing import-dependent countries to face supply shortages. Per tonne soybean oil prices then jumped to $2,000 from $1,450 in the international market.

Indonesia withdrew the ban on May 19, and supply has been increasing in the international market since then. IndexMundi’s June 22 data shows crude soybean oil was sold in the international market at $1,557.79 per tonne, up from $1,948 in April and $1,957 in March.