Reduced VAT on edible oil extended for another four months

The authorities have extended the reduced value added tax (VAT) on the import, production, and supply of edible oil for four more months until 30 April this year, to stabilise the domestic market for the key cooking ingredient. 

The reduced VAT rate will be effective from 1 January, according to a retrospective order issued by the finance ministry on Monday and published on Tuesday. The reduced VAT rate was originally set to expire on 31 December 2022.

According to the official order, 5% VAT on edible oil will be applied only at import stage. There is no VAT applied at the production or supply stages. 

Prior to March 2022, the VAT on edible oil was 15% at the import stage, 15% at the production stage, and 5% at the supply stage.

A revenue board official told The Business Standard that the commerce ministry requested them to extend reduced VAT until June this year. 

The government had previously reduced the VAT on edible oil for three months in March 2022, due to rapidly rising prices in the local market. At that time, the price of soybean oil in local markets had reached over Tk200 per litre. The reduction in VAT led to a slight decrease in the price of the cooking essential.

After the initial three-month period of the reduced VAT rate ended in early July, the government extended the rate for an additional three months until 30 September last year. The rate was then extended again until 31 December.

Despite these efforts, the price of edible oil still remains high compared to the previous years.

In December, the commerce ministry set new prices for cooking oil, which took effect on 18 December. Under the new prices, bottled and brand soybean oil is at Tk187 per litre while loose non-brand soybean is at Tk167. According to the new rate, palm oil now costs Tk117 per litre.