Why 7.5% VAT on diesel may disrupt fuel supply

The Federal Government was urged to end the 7.5% Value Added Tax on Automotive Gas Oil, also known as diesel, by the Nigerian Association of Road Transport Owners on Tuesday.

According to The Punch, NARTO stated that in order to prevent delays in the distribution and supply of Premium Motor Spirit, more commonly known as petrol, the VAT on diesel had to be stopped.

According to the association, 90% of the haulage trucks that transport PMS from depots, most of which are located in the South, to various filling stations across the nation, must be fueled with diesel.

It was noted that the price of diesel had rarely risen above N600/litre before the introduction of VAT, but was now close to N1,000/litre. It claimed that this increased the price of transporting PMS through transporters.

The Federal Government acknowledged that it has started implementing the payment of the 7.5% VAT on diesel on June 20, 2023,

This was confirmed to our correspondent by representatives of the Nigerian Customs Service and Federal Inland Revenue Service, who also stated that fuel was not excluded from paying VAT in accordance with the VAT Modification Order 2021.

The National President of NARTO, Yusuf Othman, commented on the development in a statement released in Abuja on Tuesday. He said that despite the high operating costs in the downstream portion of the oil industry, the government had ceased raising the pump price of PMS.

He pointed out that since marketers were unable to raise the price of petrol at the pump, they were also unable to do so for the transportation of PMS, which made operating costs for carriers intolerable.

He stated that “from Okpella to Lokoja is bad; from Agai to Bida to Kutugi is bad” after remarking on how terrible the majority of federal roads were.

“We need serious government attention, and it should be urgent,” the NARTO president continued. The 7.5% VAT on AGO must be examined by the government first because it is one of the factors contributing to the increase in AGO’s price.

“Secondly, the government must examine the PMS pump price so that marketers must also consider the cost of our trip. This is so that marketers can not raise transportation prices without considering the price at the pump.

“And if they don’t, there is nothing we can do but keep parking. Furthermore, if we keep parking, the supply will be unintentionally disrupted, and we do not want that.

“We cannot operate with AGO at N1,000 per litre and the dollar close to N1,000 if they (marketers) do not increase our transportation costs,” the company said, “even though we are not necessarily interested in the increase in pump price (of petrol) since Nigerians are suffering.”