Tax complexity over eco-friendly marine fuel goes

Highlights:

• No tax will be imposed on providing low-sulphur marine fuel to both foreign and local vessels operating globally.
• However, local vessels will have to bear a 35.47% tax for availing the environment-friendly fuel.  
• The BPC had earlier failed to sell the fuel due to its high price caused by a 35.47% tax levied at the distribution level.
• Before the new guideline, ships all over the world, including 35 in Bangladesh, used furnace oil having a 3.5% sulphur content.

The government has withdrawn taxes on imports of low-sulphur environment-friendly marine fuel for both foreign and Bangladeshi vessels operating globally.

The National Board of Revenue (NBR) has recently issued a letter, confirming that no tax will be imposed on bunkering furnace oil containing low-sulphur to both foreign and local vessels operating globally, considering the fuel as "export".

However, local vessels will have to bear a 35.47% tax for availing the fuel, the NBR order reads.  

Six years ago, the International Maritime Organisation (IMO) directed its member states to start using low-sulphur fuel, and the directive came into effect in January 2020.

Following the IMO's instruction, the Bangladesh Petroleum Corporation (BPC) started importing low-sulphur marine fuel from 14 September last year.

The state oil corporation also inked a contract to import 75,000 tonnes of such fuel at a cost of Tk222 crore.

But the BPC failed to sell the fuel due to its high price caused by a 35.47% tax levied at the distribution level.

As per the contract's obligation, the state-run lone fuel importer in the country is supposed to import the fuel within six months and the deadline is going to end this month.

Therefore, the BPC requested the revenue authorities to exempt the tax. In response, the NBR issued the letter on February 8.

In the letter, it has also mentioned that the fuel imported for vessels operating in the country will not get the facility.

"Now we can sell the low-sulphur fuel. We have fixed the price at $364 per tonne for Chattogram port and $376 for Mongla port," said Mohammad Zahid Hossain, deputy general manager (commercial and operation) of the BPC.

"For local vessels, the price has been fixed at $573 per tonne." 

Before the new guideline, ships all over the world, including 35 in Bangladesh, used furnace oil having a 3.5% sulphur content.

Of the shipping companies worldwide, 95% have switched to low sulphur fuel to comply with the environment-friendly recommendation.

The enforcement of the new IMO regulation has made shippers look for costlier low-sulphur fuels in the Singapore market, resulting in the hike in freight charges.

After receiving the first consignment, the BPC has also set the distribution margin for the three state-owned fuel marketing companies and bunker suppliers.

Oil marketing companies are supposed to receive Tk0.55 against the sale of each litre of marine fuel to foreign and local ships operating in Bangladesh's water, while the bunker suppliers will receive Tk0.50 per litre for carrying the fuel to oceangoing ships.