Subsidised LPG cylinder price cut by ₹6.5; market cost by ₹133

The price reduction comes soon after six consecutive monthly hikes in rates since June.

As per tax rules, GST on LPG has to be calculated at the market rate of the fuel.

Domestic cooking gas (LPG) price on Friday was cut by ₹6.52 per cylinder on account of tax impact on the reduced market rate for the fuel.

A 14.2-kg subsidised LPG cylinder will cost ₹500.90 in the national capital from the midnight of November 30 as against ₹507.42 currently, Indian Oil Corp (IOC), the country’s largest fuel retailer, said in a statement.

The price reduction comes soon after six consecutive monthly hikes in rates since June. Prior to this price cut, rates had gone up by ₹14.13 per cylinder since then.

Subsidised LPG rates were last hiked by ₹2.94 per cylinder with effect from November 1.

IOC said non-subsidised or market priced LPG rates have been cut by a steep ₹133 per cylinder to reflect fall in international oil rates and strengthening of the rupee. It will now cost ₹809.50 per 14.2-kg bottle in Delhi.

All LPG consumers have to buy the fuel at market price. The government, however, subsidises 12 cylinders of 14.2-kg each per households in a year by providing the subsidy amount directly in bank accounts of users.

This subsidy amount varies from month to month depending on the changes in the average international benchmark LPG rate and foreign exchange rate.

When international rates move up, the government provides a higher subsidy. And when they come down, subsidy is cut.

As per tax rules, GST on LPG has to be calculated at the market rate of the fuel. The government may choose to subsidise a part of the price but tax will have to be paid at market rates.

So, with the fall in market price or non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also come down, leading to the current price reduction.

“Accordingly, the upfront cash payment by the consumer for purchase of domestic LPG refill will reduce by ₹133 cylinder, i.e. from ₹942.50 per cylinder to ₹809.50 cylinder in December 2018 in Delhi market,” IOC said.

Subsidised cooking gas consumers will get ₹308.60 per cylinder subsidy in their bank accounts for the month of December. The subsidy transfer in the customer’s bank account has been reduced from ₹433.66 in November.