The Federal Inland Revenue Service (FIRS) has warned fuel suppliers in Nigeria that they must pay Value-Added Tax (VAT) on imported Automotive Gas Oil (AGO) or diesel.
What does this mean?
Importers of AGO and diesel will pay more because of the VAT, if they were spending ₦20 they will spend more than that.
How will it affect Nigerians? The VAT will be paid by importers however the increase in cost may be transferred on AGO and diesel consumers; Nigerians.
Why?
Because the importers will want to make up for whatever they are paying as VAT and to make it up they may increase the selling price. Meaning the price you are paying for diesel or AGO will go up.
Remember what happened when the former President of Nigeria, Muhammadu Buhari closed the border in 2019; the economy felt it. One order caused a ripple effect.
The prices of things went up especially imported rice and commodities. Even when it was opened the country felt it.
When one thing changes there is bound to be an effect.
When petrol subsidy was removed on May 29, 2023 by President Bola Tinubu, fuel became scarce, fuel stations recorded long queues which caused a traffic jam, the price of petrol increased and the price of transportation went up.
Nigeria’s inflation, which measures the rate in prices of goods and services, has risen to 22.41 percent in May 2023. This is amid the petrol subsidy removal. In a report cited by BizWatch Nigeria, the NBS disclosed that the consumer price index (CPI) hit the figure last month, up from 22.22 percent.
Back to the importation of diesel, although things have not changed, we can see that there is a trend of implications and ripple effects just from one change.
Already things have become a little hard for Nigerians due to the increase in price of a lot of things; transportation, food commodity and others. Due to the economy, living standards have become worse.
People who were struggling are now struggling more than ever
A letter forwarded by MBA Musa, the Assistant Comptroller-General of Tariff and Trade of Customs stated that, “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.”
As a result, all future imports of the goods must be assessed and paid for VAT at the point of entrance into the nation.
The letter further said that AGO or diesel are not excluded from destination inspection or import standards and must process Form M and PAAR, as well as make required declarations, in the NICIS II system.
The decision to tax diesel imports is said to be in accordance 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,” the letter reads.
“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.”
