The government has moved to address the growing shortage and price volatility of liquefied petroleum gas (LPG) by requesting a reassessment of VAT and tax rates at the import and local production stages.

The Ministry of Power, Energy and Mineral Resources on Thursday (January 8) sent a letter to the National Board of Revenue (NBR), seeking necessary measures to ease market pressure, particularly during the winter season when LPG demand rises sharply.

According to the ministry, nearly 98 percent of LPG used in the country is imported by the private sector and is widely used for both household and industrial purposes. Reduced international supply and a decline in pipeline natural gas during winter have led to increased demand, causing a severe supply crunch and price instability in the domestic market.

The issue was recently discussed in a meeting with leaders of the LPG Operators Association of Bangladesh (LOAB), where proposals were made to revise the existing VAT and tax structure on LPG imports and local production.

Earlier, an advisory council meeting on December 18 proposed withdrawing the 15 percent VAT exemption at the import stage and imposing a 10 percent VAT instead. Discussions also included the existing 7.5 percent VAT at the local production stage, trader-level VAT, and advance tax exemptions. However, LOAB members called for a zero percent VAT at the import stage.

In its letter, the ministry expressed agreement with imposing a VAT rate of below 10 percent at the import stage and granting exemptions at the local production and trader levels to help ensure smooth supply. The NBR has been requested to take action accordingly.

Before final implementation, a coordinated analysis has been directed involving the Energy and Mineral Resources Division, the Ministry of Commerce, and the Internal Resources Division to assess the potential impact of the measures on LPG prices at the consumer level.