FG Adds 7.5% VAT On Diesel; Petroleum Products Of Harmonized System Codes Are Exempted

The Federal Government confirmed that 7.5 percent VAT (Value Added Tax) on AGO (Automotive Gas Oil), which is popularly known as diesel, has been implemented. However, petroleum products of Harmonized System (HS) Codes are exempted from paying VAT.

Nigeria Customs Service (NCS) and Federal Inland Revenue Service (FIRS) disclosed on Monday during a media briefing at Abuja that AGO is not exempted from VAT.

The service's spokesperson, Abdullahi Maiwada explained that this VAT has been implemented under VAT Modification Order 2021, noting that this order exempts petroleum products of HS 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," he said, Punch reported. "The HS Codes are what we use to classify commodities. 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, who is an official at FIRS, also confirmed that "the position of the VAT Modification Order 2021 is that VAT is chargeable on diesel."

Following the confirmation, Nigerians reacted angrily to the new implementation that came within one month of the new Nigerian President, Bola Ahmed Tinubu's subsidy removal announcement, which led to an increase in fuel prices.

"That means for every litre of AGO you will buy, you have to pay 7.5 percent VAT of the pump price," one of the Nigerian said, Punch reported. "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 percent VAT. The total price per litre will be N698.75 per litre."

Another one said, "The Citizens will be the main IGR for this government. There is no single move to cut the cost of government from the Senate to the House to other departments. They went to education first by trying to add tuition fees, now 7.5 percent VAT on PMS. Everything directly to the common man."

The fuel subsidy removal announcement was made on May 29 and following the removal, the National Economic Council disclosed last week that they were considering the idea to pay N702 billion to civil servants as a cost of living allowance.

Whereas, President Tinubu acknowledged that the decision to remove fuel subsidy was painful for the citizens but noted that it will help the people with regular power supply, better healthcare, transport infrastructure, and education in the long run.