LPG costlier on GST, lower subsidy

introduction of gst lpg

NEW DELHI: Households will have to shell out up to Rs 32 more for each cooking gas (LPG) cylinder from this month due to the twin impact of GST and a reduction in subsidy.

Consumers will also have to pay more for the two-year mandatory inspection, installation, administrative charges for documentation for new connections and additional cylinders as these have been put in the 18% slab under GST.

LPG has been put in the 5% GST slab. Earlier, most states such as Delhi did not tax the green fuel, while some levied VAT ranging between 2% and 4%.

After the introduction of GST, LPG cylinder price will rise by Rs 12-15 each in states that did not tax the fuel. Elsewhere, the increase will depend on the gap between the GST rate and prevalent tax in states that levied VAT.

However, a simultaneous reduction in subsidy amount from June will compound the impact for consumers. “The subsidy amount of Rs 119.85 paid to eligible consumers in Agra, for example, till June has also been reduced. According to the new notification, they will receive only Rs 107 in their bank accounts,” Vipul Purohit, national secretary of All India LPG Distributors Federation, told TOI.

Both the changes will have a combined impact of up to Rs 32 per cylinder, depending on the state. The small variation in prices among states is due to variable costs such as transportation and logistics.

Senior executives of state-run fuel retailers said there was no change in the subsidy paid to consumers due to GST. The subsidy amount varies each month due to variation in the gap with international price. The tax component has to be borne by consumers just like they do in case of VAT.

“Even earlier, in states where VAT was levied on LPG, consumers knew they had to bear the tax burden as subsidy is on price, not tax component,” a senior executive told TOI.

GST has, however, brought down the cost of commercial LPG cylinders by around Rs 69. Earlier, LPG for commercial use attracted 22.5% tax, including 8% excise duty and 14.5% VAT, but after the introduction of GST, they will have only 18% tax on them. The cost of such cylinders was Rs 1,121 each earlier and will now be Rs 1,052.

Taking advantage of low global oil and gas prices, the government has also been raising the price of domestic cylinders by Rs 2 per cylinder for the last eight months with a view to paying subsidy through calibrated hikes.