LPG cylinders to get costly

The government plans to withdraw the duty exemption on the import of raw materials for LPG cylinder increase the VAT at the local manufacturing stage to increase revenue in FY2023-24.

“I propose an imposition of 7.5 per cent VAT instead of existing 5 per cent VAT at local manufacturing stage on iron or steel  (LPG Cylinder) and to continue this exemption till June 30,  2024,” Finance Minister AHM Mustafa Kamal said in parliament on Thursday.

He was presenting the proposed national budget of Tk 7,61,785 crore for FY24, starting from July 1.

He said, “The local LPG cylinder manufacturing companies have been enjoying the benefit of importing raw materials at subsidised rates for a decade. Their capacity has accordingly been developed.

“Therefore, in the interest of revenue collection, I propose to abolish various products such as steel sheet and welding wire from the related notification and also propose to keep the notification in force, till June 30, 2025.”

The leaders of LPG Operators Association of Bangladesh (LOAB) have said that the cylinder price must increase if the duty concession is cancelled and new taxation and VAT are imposed.

However, this will be a burden on consumers and create new pressures on the common people amid rising inflation.

At present, LPG entrepreneurs pay 3 per cent customs duty on import of steel sheet and welding wire as raw material of LPG cylinder in line with the exemption. General importers pay 5 per cent customs duty and 15 per cent VAT.

The government has long been encouraging use of LPG cylinders in households to reduce pressure on natural gas supply. As part of that, the duty exemption facility was aimed at increasing investment in the production of LPG cylinders locally, said LOAB leaders.

Industry insiders say that LPG cylinders were once mostly imported but that has decreased since 2015. At present, the cylinders produced by local manufacturers, including Bashundhara, Omera and Energypack, are meeting the annual demand of around 3 million.

The latest budget is 12.34 per cent bigger than the last one, which was originally proposed to be Tk 6,78,064 crore. This will be the last budget of the Awami League government's current five-year term.