7.5% VAT On Diesel May Disrupt Fuel Supply, Says NARTO
The Nigerian Association of Road Transport Owners (NARTO) on Tuesday, called on the Federal Government to stop the 7.5 per cent Value Added Tax on Automotive Gas Oil, popularly known as diesel.
NARTO said the halt of VAT on diesel had become fundamental in order to avert disruptions in the distribution and supply of Premium Motor Spirit, popularly known as petrol.
The association said diesel is the product required for fueling about 90 per cent of the haulage trucks that convey PMS from depots located mostly in the South, to various filling stations across the country.
It observed that prior to the introduction of VAT on diesel, the cost of the commodity was barely above N600/litre, but had increased to almost N1,000/litre currently. This, it said, had also raised the cost of transporting PMS by transporters.
On June 20, 2023, Economic Confidential reported that the Federal Government confirmed that it had commenced the implementation of the payment of 7.5 per cent VAT on diesel.
Officials of the Nigeria Customs Service and Federal Inland Revenue Service had confirmed this to our correspondent, and noted that diesel was not exempted from the payment of VAT based on the VAT Modification Order 2021.
Commenting on the development in a statement issued in Abuja on Tuesday, the National President, NARTO, Yusuf Othman, said despite the high cost of operations in the downstream arm of the oil sector, the government had stopped increasing the pump price of PMS.
He noted that since marketers could not raise their pump prices for petrol, it had been impossible for them to increase their costs for the transportation of PMS, and that this had made the cost of doing the business unbearable for transporters.
Othman said, “What we are talking about is for an immediate solution, and the instant intervention is the removal of 7.5 per cent VAT on diesel, because it is increasing the cost of the diesel. NARTO is complaining that the high cost of diesel is unbearable.
“Even if you discuss it with the oil marketers, all they tell you is that government has fixed the pump price (of petrol) at N617/litre, that since they cannot increase pump price, they cannot increase the fare for us. So we are in trouble.”
He noted that unless the government urgently stopped the 7.5 per cent VAT on diesel, there would be shortage of petrol supply because transporters might be forced to park their truck.
According to him, “Diesel is now getting to N1,000/litre, and our transporters are still on the same rate. But the government will say they don’t have business with us because it is deregulated. But the marketers say if it is full deregulation PMS would go up.
“Government pegged (PMS) pump price at N617, and because of that, even if diesel reaches N1000/litre, they (marketers) can’t increase transportation cost for us. And to make things worse, government has put 7.5 per cent VAT on AGO and the dollar is about N1,000 now.”
He noted that most federal roads were terribly bad, adding that “from Okpella to Lokoja is bad; from Agai to Bida to Kutugi is bad.”
The NARTO president added that, “We need serious government attention and it should be urgent. First of all, government has to look at that 7.5 per cent VAT on AGO because that is one of the reasons why AGO (price) went up.
“Secondly, government has to look at the pump price of PMS so that marketers have to also look at the transportation price for us. This is because without looking at the pump price, marketers cannot increase transportation price.
“And if they do not do that, we have no choice than to continue to park. And if we continue to park, it will create unwanted disruption of supply and we don’t want that.
“Although we are not necessarily interested in the increase in pump price (of petrol) since Nigerians are suffering, if they (marketers) don’t increase our transportation cost, with AGO at N1,000/litre and the dollar close to N1,000, we cannot operate.”
