FG Implements 7.5% VAT On Diesel
The Nigerian government has confirmed the implementation of a 7.5% Value Added Tax (VAT) on diesel, known as Automotive Gas Oil (AGO). The Nigeria Customs Service (NCS) and Federal Inland Revenue Service (FIRS) officials stated that AGO is not exempt from VAT payments, citing the VAT Modification Order 2021. This decision has been met with condemnation from Nigerians, who are still adjusting to the recent increase in the price of petrol, unaware that additional charges for diesel were being planned.
When asked about the collection of 7.5% VAT on AGO imports, the spokesperson for the NCS, Abdullahi Maiwada, confirmed that it is indeed being collected. He explained that the VAT Modification Order 2021 exempts petroleum products under specific Harmonized System Codes (HS Codes) from paying VAT. However, AGO falls under a different HS Code, 2710.19.21.00, which is not exempted from VAT.
Tobi Wojuola from the FIRS also confirmed that VAT is chargeable on diesel according to the VAT Modification Order. The NCS issued a letter, dated June 8, 2023, to its personnel stating that VAT must be paid on diesel. It clarified that while petroleum products falling under certain HS Codes are exempted from VAT, AGO or diesel falls under a different HS Code and is not exempted. The letter emphasized that future imports of diesel should assess and pay VAT upon entry into the country.
Nigerians are expressing their frustration with the introduction of the 7.5% VAT on diesel, particularly following the recent removal of petrol subsidies. Just a month ago, President Bola Tinubu announced the removal of petrol subsidies, resulting in a significant increase in petrol prices across the country. The Finance Act 2020 had already raised the VAT rate from 5% to 7.5% on various commodities, including diesel, starting from February 20, 2020. However, diesel had previously been exempt from VAT, making this new development particularly burdensome for Nigerians.
