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Mandatory VAT payment on AGO, diesel

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By Mercy Kelani

HS Codes classify commodities, exempting some from VAT payment.

On June 19, 2023, the federal government of Nigeria affirmed commencement of the implementation of 7.5 percent Value Added Tax (VAT) payment on Automotive Gas Oil (AGO), generally called diesel. The commencement was announced by officials of the Nigeria Customs Service and Federal Inland Revenue Service in Abuja. Nigerians strongly disagree with this development as they lamented how unbearably they are trying to cope with inflated Premium Motor Spirit’s, popularly known as petrol, pump prices.

Spokesperson for the Nigeria Customs Service, Abdullahi Maiwada, asserted that the service now collect the 7.5 percent. He added that although there is an exemption of petroleum products of Harmonised System (HS) Codes under VAT Modification Order 2021, petroleum products of HS Codes that are excluded from paying are those under 2709.00.00.00 – 2710.19.12.00. The function of the HS Codes are for classification of commodities. AGO has its HS Codes classified under 2710.19.21.00, with no exemption from the VAT payment.

Nigerians lament the consequences of the payment on AGO.

An official of the Federal Inland Revenue Service, Tobi Wojuola, likewise confirmed the development. He emphasized that it was the VAT Modification Order’s position which dwells on the concept that is chargeable on diesel. The NCS, in a letter with reference “NCS/T&T/T/899/217/VOL.I,” on June 8, 2023, stated that it is mandatory that it is paid on diesel. The letter had the signature of the Assistant Comptroller-General (Tariff and Trade), Mba Musa, representing the Deputy Comptroller-General (Tariff and Trade).

Subsequently, all importations of AGO, diesel, are required to ensure assessment and payment of VAT before entry into the country. It was also stated that there is no exemption of AGO and PMS from destination inspection and import guidelines. Therefore, they are required to process Form M and PAAR and make appropriate declarations in the system of the NICIIS II. Nevertheless, Nigerian citizens lament concerning the effects of this development on the price of diesel.

Finance Act 2020 increased VAT from 5 percent to 7.5 percent.

These payments were imposed on AGO and were announced barely one month after removal of petrol subsidy by President Bola Ahmed Tinubu, whilst delivering his inaugural speech, which has increased the pump price of PMS in many parts of the country from N188 to over N500. Also, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has previously announced the raise of the country’s tax from five percent to 7.5 percent, under the Finance Act 2020, on commodities including AGO. This Act was implemented on February 20, 2023.

Commodities that are exempted from the VAT payment include bread, cooking oils, fish, starch, meat, milk, pulses, salt, water, tampons, honey, cereals, culinary herbs, flour, fruits, poultry, nuts, roots, vegetables, sanitary pads, even tuition for tertiary, secondary, and primary and nursery education. While other commodities have been compliant to these taxes, diesel only just began to charge these fees. However, Nigerians have requested that there is a review of this development due to the recent removal of subsidy.

As promised, Mr. President has begun widening the tax net.

Twitter User, Inagwa, estimated the total price of diesel per litre, after paying VAT to be N698.95. Another lamenting non-Nigerian stated that Tinubu was not joking when he promised to widen the tax net. Also, in Oyo, it was stated that there is no plan to reduce the cost of the government to the Senate, House of Representatives and other departments. Education was seen as the first targeted area for the increment in tuition fees. At the moment, the VAT payment on AGO and PMS are the issues affecting Nigerians now.

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