Just as Nigerians are still grappling with the ripple effects of the removal of subsidy on petrol , the Nigeria Customs Service has also served a notice to the importers and suppliers of Automotive Gas Oil (AGO), otherwise known as Diesel, to brace up for the payment of 7.5 per cent Value Added Tax(VAT) on the product import, which is expected to push the price of the product higher.
These multiple increments in the prices of petroleum products come amids 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 take effect from July 2023.
The Customs notice, dated June 8th, 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, to diesel suppliers.
According to the memo, the VAT Modification Order 2021 only exempts 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, enjoins 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, are 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 is 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, saying that it will increase their cost of doing business and affect their profit margins.
This latest development comes after the federal government stopped the payment of subsidy on premium motor spirit (PMS), also known as 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.
Source: Eyewitnessnews
