EXCLUSIVE: Prices of Diesel to rise as Customs begins VAT collection

The Nigeria Customs Service (NCS) on Monday explained that the Service has started the implementation of a directive to collect Value Added Tax (VAT) on Automated Gas Oil (AGO) or diesel imported into the country based on the VAT Modification Order 2021.

Speaking exclusively with the Nigerian Tribune, the National Spokesman of the NCS, Abdullahi Maiwada explained that only petroleum products which fall under HS Code 2709.00.00.00 and HS Code 2710.19.12.00 are exempted from payment of VAT.

According to the Customs National Spokesman, “The NCS collects VAT on behalf of the FIRS. The VAT Modification Order 2021 only exempts petroleum products of HS Code 2709.00.00.00 and HS Code 2710.19.12.00 from payment of VAT.

“AGO is classified under HS Code 2710.19.21.00 and is not exempted from paying VAT based on the VAT Modification Order 2021.

“It is expected that AGO and diesel since they are not exempted from VAT, must process Form M and PAAR and make appropriate declarations under the NICIS 2 system.”

For many diesel suppliers, this development comes as a surprise since they 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.

Some of the diesel suppliers, who spoke to newsmen on condition of anonymity, confirmed receipt of the letter and stated that any difference in the cost of doing business due to the changes will be transferred to the end users of the products.

“Diesel is essential for many businesses and households in Nigeria because of the poor state of electricity supply. If we have to pay VAT on diesel imports, it means that we will have to increase our prices to cover our costs. This will affect our customers who rely on diesel for their operations and livelihoods. It will also increase inflation and affect the economy negatively,” some of the diesel suppliers said.

They urged the government to reconsider its decision and exempt diesel from paying VAT, saying that it would be more beneficial for the country in terms of revenue generation and economic growth.

They said that instead of imposing VAT on diesel imports, the government should focus on improving local refining capacity and reducing dependence on imported petroleum products.

“We have four refineries in Nigeria that are supposed to produce diesel and other products, but they are not working optimally. If the government can fix them and make them work efficiently, we will not need to import diesel or pay VAT on it. We will also save foreign exchange and create jobs for Nigerians,” they stated.