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  1. New tax regime: Government to charge same GST rates for domestic, commercial usage of LPG

New tax regime: Government to charge same GST rates for domestic, commercial usage of LPG

LPG, one of the three petroleum products to be under the GST from day one along with kerosene and naphtha, would be taxed at the same rate for commercial and domestic users.

By: | Published: April 2, 2017 5:32 AM
Liquefied petroleum gas, petroleum products, GST, commercial and domestic users, Dharmendra Pradhan, PAHAL, crude oil, natural gas, petrol, diesel, GST council LPG, one of the three petroleum products to be under the GST from day one along with kerosene and naphtha, would be taxed at the same rate for commercial and domestic users. (Source: Reuters)

Liquefied petroleum gas (LPG), one of the three petroleum products to be under the goods and services tax (GST) from day one along with kerosene and naphtha, would be taxed at the same rate for commercial and domestic users. The move is a big positive for restaurants and hotels; it could also give a push to use of LPG in automobiles. “It (same rate) has already been decided,” said petroleum minister Dharmendra Pradhan on Saturday. Although the sales tax levied by states on LPG is currently modest (0-3%), that on commercial LPG is much higher at 12.5-14%. Also, domestic LPG is exempt from excise duty while there is an 8% duty on the commercial variant.

Although the sales tax levied by states on LPG is currently modest (0-3%), that on commercial LPG is much higher at 12.5-14%. Also, domestic LPG is exempt from excise duty while there is an 8% duty on the commercial variant. About 90% of the total LPG consumed in the country is used by households. Although subsidised cylinders meant for household use get diverted for commercial purposes, this trend has of late been largely arrested with the direct benefit transfer scheme (PAHAL) for LPG. While the above three petroleum products will be under GST right from the start, crude oil, natural gas, petrol, diesel and aviation fuel will be initially outside the new tax regime.

While the above three petroleum products will be under GST right from the start, crude oil, natural gas, petrol, diesel and aviation fuel will be initially outside the new tax regime. The exclusion of some or all of petroleum goods from GST, according to experts, could create problems for the oil companies when it comes to availing the input tax credit. In the larger context of avoiding cascading of taxes, it would be better if all products are under GST, they say.

“While outputs are clearly identifiable, it may be difficult to find out the share of inputs going into each output. So, when some items coming out of a production (value-addition) process are under GST and others are not, it could create problems for industries when it comes to availing the input tax credit,” said Sanjay Garg, partner at KPMG India.

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The ITC rules being finalised by GST council may come out with a turnover-based formula to address the issue about  ITC computation on products with common inputs. “States were wary of revenue loss owing to GST on commodities like petrol, diesel and LPG. Since subsidised LPG was taxed modestly as such, the impact on states was not to be high,” said Deepak Mahurkar, leader oil and gas, PwC India.

“The clarification from the minister regarding LPG grades to be taxed under a single GST rate, is a very positive development. With maze-like multiple tax rates on LPG on their way out, impact of this is going to be felt immediately,” said Suyash Gupta, president, India Auto LPG Coalition.

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