The Federal Government has confirmed the implementation of a 7.5% Value Added Tax (VAT) on Automotive Gas Oil (diesel). Representatives from the Nigeria Customs Service and the Federal Inland Revenue Service verified the imposition of VAT on diesel, stating that it was not exempted based on the VAT Modification Order 2021.
The news has been met with condemnation from Nigerians who argue that citizens are still grappling with the recent increase in the pump price of petrol (Premium Motor Spirit), unaware of the impending rise in diesel prices.
Abdullahi Maiwada, the spokesperson for the Nigeria Customs Service, confirmed the collection of 7.5% VAT on AGO imports, explaining, “There’s what we call VAT Modification Order 2021, which exempts petroleum products of Harmonised System Codes. But the HS Codes for Petroleum products that are exempted from paying VAT are those in the region of 2709.00.00.00 – 2710.19.12.00. But AGO is classified under HS Code 2710.19.21.00, which is not exempted from the payment of VAT. Now, this is based on the VAT Modification Order 2021.”
Tobi Wojuola, an official of the Federal Inland Revenue Service, confirmed that VAT is chargeable on diesel, citing the VAT Modification Order as the basis for this decision.
The implementation of VAT on diesel was communicated to Nigeria Customs Service personnel through a letter (NCS/T&T/T/899/217/VOL.I) dated June 8, 2023. The letter, signed by Mba Musa, Assistant Comptroller-General (Tariff and Trade), on behalf of the Deputy Comptroller-General (Tariff and Trade), clarified that VAT must be paid on diesel imports.
Nigerians have expressed their dissatisfaction with the introduction of a 7.5% VAT on diesel. This discontent follows the recent removal of petrol subsidies by President Bola Tinubu, resulting in a significant increase in petrol prices across the country.
Finance Minister, Budget, and National Planning, Zainab Ahmed, had previously announced that the Finance Act 2020 increased the VAT rate from 5% to 7.5%, encompassing commodities such as diesel. However, certain items, including honey, bread, cereals, cooking oils, fish, fruits, meat, poultry, milk, vegetables, water, and others, remain exempt from VAT.
The latest development has had a severe impact on Nigerians, prompting calls for a review, especially considering the recent removal of fuel subsidies. Social media users have expressed their concerns, highlighting the additional burden on consumers.
One Twitter user, Ingawa, explained, “For every litre of AGO you will buy, you have to pay 7.5% VAT of the pump price. For example, if one litre of AGO is N650 at the filling station, then you have to pay an additional N48.75 being payment for 7.5% VAT. The total price per litre will be N698.75.”
Another user, Angry Nigerian, criticized the government’s tax policies, stating, “When Tinubu said ‘widen the tax net,’ you people thought he was joking. The only thing that man knows is tax, tax, and tax. Ask Lagosians.”
Concerns were also raised about the citizens bearing the brunt of the government’s revenue generation efforts, while no substantial measures have been taken to reduce government expenditure. Users expressed frustration, pointing out that the government first attempted to introduce tuition fees and is now implementing a 7.5% VAT on petrol.