The government has overhauled the Value Added Tax (VAT) structure on Liquefied Petroleum Gas (LPG) in a move aimed at strengthening energy market stability, safeguarding supply chains and easing cost pressures on consumers and industries.
In a statement, the National Board of Revenue (NBR) said the revised tax framework is designed to streamline the LPG supply system and reduce cumulative taxation that had been affecting pricing dynamics in the energy market.
LPG plays a critical role in Bangladesh’s energy mix, particularly for urban households and off-grid communities that rely on it for cooking. It is also widely used in industrial operations, making pricing stability a key concern for both domestic consumers and manufacturers.
Under the previous structure, a 7.5 per cent VAT was imposed at the local production and trading stages, alongside a 2 per cent advance tax at the import stage. Energy stakeholders had argued that the layered tax system increased operational complexity and added pressure to retail prices.
Following an application from the LPG Operators Association of Bangladesh and recommendations from the Ministry of Power, Energy and Mineral Resources, the government issued two statutory regulatory orders on 16 February to revise the system.
Under the new framework, effective until 30 June 2026, VAT at the local production and trading stages and the 2 per cent advance tax at import have been withdrawn. Instead, a single 7.5 per cent VAT will now be applied at the import stage.
The restructuring means VAT will be collected only once, at the point of import, eliminating multiple tax layers across the downstream supply chain. As a result, no VAT will apply to value addition during local production and distribution after import.
According to the NBR, the change is expected to reduce the overall VAT burden on consumers by around 20 per cent compared with the previous system.
Energy officials believe the move will help prevent price volatility in the LPG market, support uninterrupted supply and enhance transparency in the pricing mechanism. By simplifying the tax structure, the government aims to improve efficiency across the LPG value chain and create a more predictable environment for investors and operators in the energy sector.
The measure is also expected to ease cost pressures for industrial users, many of whom depend on LPG as an alternative fuel source amid evolving energy demands.
The revised VAT structure will remain in force until 30 June 2026, unless further extended or amended, as part of broader efforts to ensure energy affordability and market stability.
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