LPG Gas Cylinder and GST-Effects to the consumers

One of the most needed household fuels in India is Liquefied Petroleum Gas (LPG). In cities as well as in villages, LPG cylinders are very popular in cooking and have continued to play a central role in the clean energy transition in India. Nevertheless, the price charged to the consumers is not only determined by the international rate of crude oil but also by the taxation according to the Goods and Services Tax (GST) level.

GST Rates on LPG

The GST system provides a lower GST rate of 5 percent on domestic LPG cylinders as they are considered to be essential commodities. This will make the cooking gas affordable to the households especially the middle and low-income groups. Mostly, commercial LPG cylinders, found in hotels, restaurants and businesses are charged a higher tax percentage of 18 percent GST. This differentiation structure guarantees that domestic customers do not bear the high taxation expenses, commercial users pay more tax to the exchequer.

Subsidy and Pricing

Previously, the domestic LPG was government-subsidized, bringing the retail price down to a low level. The subsidy coverage has decreased with time and the effective cost of LPG is more sensitive to international prices and the rates of GST. The household cyclinder 5 percent GST is some relief but particularly during times of international fuel prices increases.

Consumer Challenges

Although the tax rate is low, consumers tend to experience problems whenever the cost of base LPG goes up based on the world energy crisis or the exchange rate. GST is computed on the final base price and hence the increase in the latter automatically increases the tax component as well. This will incur high cost to the households and in the case of large families or rural families who solely rely on LPG, this may overstretch their monthly budget.

Way Forward

According to experts, the government is advised to think of additional relief steps especially to those who are economically weak. LPG can be made more affordable through options like targeted subsidies, a direct benefit transfer or by making the effective GST burnt on priority groups lower. This would not only alleviate the financial pressure but also promote the use of clean fuel in a larger scale, eliminating the use of polluting sources of fuel such as firewood or kerosene.