Oil service providers warn against VAT on LPG
The Oil and Gas Service Providers Association of Nigeria has urged the Federal Government not to impose Value Added Tax on Liquefied Petroleum Gas.
OGSPAN said in a statement that the planned imposition of VAT on LPG would stifle demand, utilisation, investment and growth of the sector in the country.
The National President, OGSPAN, Mr. Colman Obasi, said, “As a stakeholder in the sector, we were delighted when the Federal Government previously excluded operators in the LPG sector from paying VAT.
“We were even more delighted when it declared January 1, 2021 to December 31, 2030 as ‘The Decade of Gas Development for Nigeria’ with emphasis on LPG. However, having taken these steps, we were shocked to learn that the Federal Government is currently considering imposing VAT, targeted at increasing its revenue.”
According to the association, a Presidential directive was issued on July 11, 2005 to remove VAT on LPG but the approved memo erroneously had the word ‘import’ left on it because imports were the only source of gas at the time.
Obasi said, “This meant that the Federal Inland Revenue Service charged VAT on locally produced LPG but there was no output VAT, so the VAT cost was absorbed as a loss by industry players.
“Industry operators fought for 14 years to reverse this situation and the Minister of Finance finally removed the VAT on ‘domestically produced gas’ under a gazette issued in 2019, thus stopping the FIRS from charging VAT on LPG under a loophole that was created in error.”
He added, “The FIRS itself under several subsequent letters (now available in the public domain) advised companies that neither input nor output VAT was payable on LPG in line with other petroleum products.
“Industry operators and experts had warned at the time that insertion of the phrase ‘locally produced’ in front of LPG would lead to the reverse case through this legal loophole and yet again, another round of needless quagmire.
“Experts have repeatedly pointed out that of all the petroleum products listed in that gazette, ‘why was LPG singled out for the phrase ‘locally produced’; why not gasoline, and diesel, which we don’t produce and yet import over 100 times more quantity than LPG.”
Obasi noted that the LPG sector had suffered from many problems, including policy inconsistency, inadequate funding and low domestic utilisation, which he said needed to be fully addressed by the current administration.
He said the planned introduction of VAT on LPG could reverse the gains already made in the Federal Government Gas Expansion Programme targeted at achieving rapid development of the sector.
Credit to Punch Newspapers.8th July 2021.