Sarah Jackson
Wed, Aug 30, 2023 7:45 PM

Nigeria Customs Service Implements VAT on Imported Diesel

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Nigeria Customs Service Implements VAT on Imported Diesel
The Nigeria Customs Service has announced the implementation of value-added tax (VAT) on imported automobile gas oil (AGO), commonly known as diesel. This development is in line with the Finance Act, which mandates a 7.5 percent VAT on diesel costs. The price of diesel has been rising steadily, and this move is likely to further burden Nigerians and manufacturers.

The Nigeria Customs Service (NCS) has taken a significant step in revenue generation by implementing value-added tax (VAT) on automobile gas oil (diesel) imported into the country. This directive was communicated in a memo dated July 28, 2023, addressed to all importers and agents of diesel.

According to the memo titled "Request for Charge of Value Added Tax (VAT) on Automobile Gas Oil (AGO) or Diesel Imported into the Country," VAT will now be charged on diesel imports, following the provisions of the Finance Act. The memo referenced a headquarters circular that focused on this subject matter.

Importantly, the communication directed that the Procedure Code 4900 000 should be used on all importations of AGO, and importers are prohibited from using an additional code, specifically Code 409.

Since the introduction of the Finance Act in 2020, the Nigerian government has been working towards the full implementation of a 7.5 percent VAT on diesel costs. However, the latest move by the Nigeria Customs Service is expected to cause a drastic increase in the price of diesel, further worsening the economic conditions faced by Nigerians and manufacturers.

The price of diesel has already been on the rise, with the National Bureau of Statistics reporting that a litre of diesel cost N794.48 in July 2023 compared to N774.38 during the same period the previous year. This continuous surge in diesel prices puts a strain on the Nigerian economy and directly affects various sectors, including transportation, manufacturing, and power generation.

The implementation of VAT on diesel imports not only increases the cost of living for Nigerians but also adds to the production expenses of businesses. Manufacturers heavily reliant on diesel-powered generators for production and backup power face an additional financial burden. This move has the potential to hinder productivity and economic growth.

As the Nigerian economy continues to face various challenges, the government and relevant authorities must consider the impact of policy decisions on the general populace and business operations. Finding a balance between revenue generation and mitigating the negative effects on the economy is crucial.

In conclusion, the Nigeria Customs Service's move to implement VAT on imported diesel aligns with the Finance Act's provisions. While it may contribute to the government's revenue, it is likely to lead to a further increase in diesel prices, affecting Nigerians and manufacturers. Striking a balance between revenue generation and economic stability should remain a priority in policy decisions.

Source of content: OOO News 2023-08-30 News

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