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  • GST Impact On Gas

    Goods and services tax (GST) has left most of us curious and confused. In the last few months, even before the implementation of the GST rule, many businessmen were running from pillar to post to get the paperwork done for their business to function under the new taxation system. Among the many things that affected common people under the new GST rule, the increase in the price of LPG cylinders for domestic use tops the list. For detailed information on the new GST rule in India, the new tax structure, and its effect on the gas industry, read on.

    What is GST?

    GST stands for goods and services Tax. GST was introduced to revolutionise the way Indians do their taxes. But many may wonder what is GST exactly? How will it be any different from our current taxation system? To those, the answer is, GST is an indirect tax that will be levied on all transactions related to goods and services throughout India, except Jammu and Kashmir.

    GST will replace multiple taxes like excise duty, additional customs duty, surcharges, service tax, and other such charges which were previously charged by both the centre and the state governments. Other levies and charges which were previously levied on transporting goods from one state to another are also void under this GST regime.

    Going forward, GST will be charged on all transactions related to sale, purchase, transfer, or import of any goods and services that are carried out within the borders of India. GST is the new tax system adopted by the Government of India under which the taxation policy is administered by both the states and the union government.

    Under the GST rule, for every transaction that is made within the state, central GST will be levied by the Central Government of India and a state GST will be charged by the concerned State Government.

    GST tax structure

    The new GST rule has changed the existing tax structure upside down. According to the new rule, there are five different tax rates that will be charged on goods and services in India. The tax rates are classified under 0%, 5%, 12%, 18%, and 28% GST.

    Products and their classification under the GST rule

      0% GST 5% GST 12% GST 18% GST 28% GST
    Products Milk Domestic LPG Butter Hair oil Small cars
      Eggs Tea Ghee Soap Air conditioner
      Curd Edible oils Almonds Computers Fridge
      Besan Spices Mobiles Printers High-end motorcycles

    Please note that is not the full list of products under these tax brackets. These are a few products that fall under the GST rule.

    Highlights of the GST rule on gas

    • Domestic cylinder prices have gone up by about Rs.32 per cylinder.
    • This increase in domestic cylinder prices is the steepest increase in the last 6 years. The previous significant increase was on 25 June 2011, when the price of domestic subsidised LPG rose by Rs.50 as the price of oil in the international market surged.
    • Every household is eligible to receive 12 sunsidised cylinders of 14.2 kgs in one year. After the 12 cylinders, they will have to purchase by paying the market price. The domestic LPG cylinders that consumers buy after exhausting their quota will attract 18% GST from now on.
    • LPG consumers across the country will have to pay 18% GST on other services like the mandatory gas inspection, installation, and administration expense involved to procure new LPG connection or to get an additional cylinder.
    • In states that did not charge tax on LPG cylinders before, the cylinder price will go up by Rs.12 to Rs.15.
    • However, GST has reduced the price of commercial LPG cylinders by about Rs.69. Previously, commercial LPG cylinders used to attract various taxes and charges that amounted to a total of 22.5% which included 8% excise duty and 14.5% Value Added Tax(VAT). Whereas, after the implementation of GST, commercial LPG cylinders attract only 18% GST.
    • It is stated that a commercial LPG cylinder which was costing Rs.1,121 previously, will now cost Rs.1,052 in the national capital, New Delhi.

    GST impact on cooking gas

    The new GST rollout if not a good news for people who use LPG cylinders for domestic purpose. According to the GST rule, domestic cylinder prices are expected to go up by about Rs.32 per cylinder. The increase is the price of cooking gas in India is mainly due to two reasons. Firstly, due to the implementation of the new taxation system called GST and the second reason is the decrease in subsidies. Moreover, the increase in the domestic LPG cylinders depends on the state the consumer resides in.

    Not to forget, states like Delhi wasn’t charging tax on green fuel and similarly many other states were only charging VAT between 2% to 4% tax for domestic cooking gases are now falling under the new GST rule. These states will see an increase of Rs.12 to Rs.15 in the gas prices. Currently, the rate of one 14.2 kg LPG cylinder cost in Delhi is Rs.564.

    This increase in domestic cylinder prices is the steepest increase in the last 6 years. The previous significant increase was on 25 June 2011, when the price of domestic subsidised LPG rose by Rs.50 as the prices of oil in the international market surged. As mentioned earlier, every household is eligible to receive 12 cylinders of 14.2 kgs in one year. After the 12 cylinders, they will have to purchase by paying the market price. The domestic LPG cylinders that consumers buy after exhausting their quota will attract 18% GST from now on.

    Apart from that, LPG consumers across the country will have to pay 18% GST on other services like the mandatory gas inspection, installation, and administration expense involved to procure new LPG connection or to get an additional cylinder.

    GST impact on commercial gas/auto LPG

    The Indian Auto LPG Coalition stated that auto LPG is one of the cleanest automotive fuel which is much better than petrol and diesel. It won’t be unfair to compare auto LPG with compressed natural gas(CNG). Auto LPG is also the third most commonly used auto fuel across the world. Auto LPG is known for many benefits like increasing the quality of air that we breathe, reduce carbon emissions, and making the world an eco-friendly place. Considering the benefits that our country will get if auto gas is made cheaper, the Government of India has made it less expensive under the new GST rule.

    GST has reduced the price of commercial LPG cylinders by about Rs.69. Previously, commercial LPG cylinders used to attract various taxes and charges that amounted to 22.5% total tax which included 8% of excise duty and 14.5% of Value Added Tax(VAT). Whereas, after the implementation of GST, commercial LPG cylinders attract only 18% GST. It is stated that a commercial LPG cylinder which was costing Rs.1,121 previously, will now cost Rs.1,052 in the national capital, Delhi.

    GST impact on oil and gas companies

    The oil companies in India will have to take the setback caused by the implementation of the new GST rule. The leading oil and gas producing companies in India like ONGC, Natural Gas Corp, and OIL will have to pay higher tax under the GST rule as they will have to pay substantial extra tax. To avoid major disruption in the revenue earned by the state from the oil industry, for now, the government has excluded crude oil, jet fuel, natural gas, diesel, and petrol from the GST regime. Experts in the industry state that the new GST rule will increase the operational cost involved in oil companies and will affect the supply chain.

    Conclusion- Does GST have a positive impact on the gas industry?

    Though for now, only commercial LPG users enjoy the benefit of the new GST rule, the gas industry, in general has certain benefits under this new taxation system. But, as time passes by, many car manufacturers will recognise the importance of LPG-fuelled cars and will explore that segment. Once the sale of LPG-fuelled cars increases in India, the benefits of GST will be clearly seen. However, on the domestic front, people will have to wait and see the new taxation system settle down. 

    News about GST Impact On Gas

    • LPG Is Exempted From E-Way Bill Rules Under The New GST Rule

      Under the new GST rule, it is mandatory to have permits or e-way bills if a businessman is transporting more than Rs.50,000 worth consignment. However, the Indian Government has excluded some commonly used items like gas, currency, and jewellery from this rule.

      Going forward, those who transport LPG need not have an electronic permit to transfer their goods from one place to another.

      On 5th August 2017, a senior finance ministry member stated that in the last meeting held for GST council, a list of 153 items were exempted from the process of obtaining electronic permits or e-way bills and LPG is one of them.

      21st August 2017

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