As Nigerians continue to grapple with the hash impact of the removal of subsidy on petrol, the Nigeria Customs Service (NCS) has served notice to importers and suppliers of Automotive Gas Oil (AGO) aka diesel, to get ready to pay 7.5 per cent Value Added Tax (VAT) on the product import, which will ultimately push the price higher.
These multiple increments in the prices of petroleum products come amid a planned increase in electricity tariff in July.
Meanwhile, the notice on the payment of VAT on diesel, at the instance of the Federal Inland Revenue Service (FIRS), is expected to also take effect from July.
The Customs’ notice, dated June 8, 2023, and addressed to diesel suppliers, was signed by the Assistant Comptroller-General of Customs in charge of Tariff and Trade, MBA Musa, on behalf of the Deputy Comptroller-General of Customs in charge of Tariff and Trade.
According to the memo, the VAT Modification Order 2021 only exempted petroleum products of HS codes 2709.00.00.00 – 2710.19.12.00 from paying VAT.
AGO, or diesel, falls under HS Code 2710.19.21.00 and is not exempted from paying VAT.
The memo, therefore, enjoined all future importers of the product should assess and pay VAT at the point of entry into the country.
The memo also stated that AGO, or diesel, is not exempted from destination inspection or import guidelines and as such is expected to process Form M and PAAR as well as make declarations appropriately in the NICIS II system.
It further stated that the decision to charge VAT for diesel importations was stated to be in compliance with the VAT Modification Order 2021.
“I am directed to forward a letter from Federal Inland Revenue Service on the above subject matter. The VAT Modification order 2021 only exempts Petroleum products of HS codes 2709.00.00.00 – 2710.19.12.00 from payment of VAT. AGO or Diesel falls classifiable under HS Code 2710.19.21.00 and is not exempted from paying VAT.
“Subsequent upon the above, all future importations of the product should assess and pay VAT at the point of entry into the country.
“Also note that AGO or diesel are not exempted from destination inspection or import guidelines and as such are expected to process Form M and PAAR as well as make declarations appropriately in the NICIS II system,” the circular said.
This development comes as a surprise to many diesel suppliers who have been importing the product without paying VAT for years.
Some of them have expressed their displeasure and confusion over the new directive, arguing that it will increase their cost of doing business, and affect their profit margin.
This latest development comes after the Federal government stopped the payment of subsidy on premium motor spirit (PMS) – petrol – last month, pushing the pump price to N500 per litre from N185 per litre.
As this was causing pain to Nigerians, the price of diesel eased from over N700 per litre to about N630 per litre
However, the payment of VAT on diesel by suppliers may push the pump price higher again, with the price of electricity expected to rise next month due to the planned tariff hike.