Will GST Put Dual Impact on LPG Cylinder Prices?

After GST rolls out, the price of LPG cylinder is scheduled to rise by Rs. 12 to Rs. 15. In addition, the government will also reduce the subsidy from this month. It means GST will have dual impact on LPG prices.

Consumers will need to pay more for the installation, 2 year compulsory inspection, and administrative charges for paperwork for additional cylinders and new connections as they have been planned in 18% slab under GST.

LPG has been kept in 5% GST slab. Earlier states like Delhi didn’t charged tax on the green fuel, while some charged VAT ranging from 2% to 4%. After GST arrives, the price of LPG cylinder will rise by Rs. 12 to Rs. 15 each in the states where fuel was exempted. Otherwise, the increase will be based on the gap between the prevalent tax and GST rate in states which charged VAT.

However, a huge rise in subsidy from June will cover the impact for the users. For example, the amount of Rs. 119.85 on subsidy to the eligible consumers in Agra till the month of June has also been slashed.  When it comes to new notification, they will get just Rs. 107 returned on their bank accounts, according to Vipul Purohit, National Secretary, All India LPG Distributors Federation.

Both changes will lead to a dual impact of around Rs 32 per cylinder, according to the state. This small change in prices in the states is because of variable costs like logistics and transportation.

According to the senior executives of fuel retailers, no change was made in the subsidy to the buyers because of GST. The variation of the amount of subsidy every month is due to changes in gap with global prices. The tax should be borne by the buyers just like they would do in VAT.

In states where VAT was charged on LPG, consumers understood they still need to face the burden of tax as the government provides subsidy on price, not on tax.

However, GST has slashed the price of commercial LPG by Rs. 69. Earlier, the tax charged on commercial LPG was 22.5%, including 14.5% VAT and 8% excise duty. But after GST rolled out, the price would be 18%. Earlier, the cost of those cylinders was Rs. 1121 each. Now it will be Rs. 1052. By considering the benefits of low gas and oil prices on international level, the domestic cylinders have been costly for the past 8 months by Rs. 2 per cylinder for paring subsidy with calibrated hikes.

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