Five percent VAT will be applicable on both Petrol and Diesel when VAT will be implemented on January 1, 2018.

The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, on Sunday, 27 August 2017 issued Federal Decree Law No 8 for value-added tax with one of the lowest rates in the world.

Since petrol and diesel is a business activity, they would be subject to VAT, said Girish Chand, director MCA Management Consultants. “However, considering the low VAT rate and the insignificant composition in the overall spending of an individual, VAT on petrol and diesel would have a negligible impact,” Chand pointed out.

Chand explained that VAT rates are related to business activity, not end users, so there would not be different VAT rates for commercial and individual vehicles.

The UAE has aligned oil prices with international rates and they are adjusted every month by the Ministry of Energy.

For the month of August, the prices were revised upward by three fils with unleaded gasoline 98 at Dh1.89, unleaded gasoline 95 at Dh1.78 and unleaded gasoline 91 at Dh1.71; while diesel was increased by four fils to Dh1.88.

Based on this estimate, filling a 50-litre tank with unleaded gasoline 98 will today cost Dh94.5. Following the five per cent VAT implementation next year, the price will rise to Dh99.2. Similarly, the 2017 Land Cruiser 5.7 (EXR) with a 136-litre fuel tank capacity costs approximately Dh257 to fill unleaded 98 but following VAT, the consumer will have to shell out approximately Dh270.

This article is an excerpt from an article published on KhaleejTimes.com and you can read the complete article here.