Liquefied Petroleum Gas (LPG) is a commonly used fuel for cooking and heating purposes in Indian households and businesses. With the introduction of the Goods and Services Tax (GST) regime, understanding the impact of GST on LPG cylinders has become crucial for consumers and businesses alike. This article delves into the applicability of GST on LPG cylinders, the relevant GST rates, HSN codes, and Input Tax Credit (ITC) claims.
Table of Contents
How GST Applies to LPG Cylinders and Gas?
- Domestic LPG cylinders: Used for household cooking purposes
- Commercial LPG cylinders: Used in businesses, restaurants, and industries
The GST rate applicable to LPG cylinders varies depending on their classification and intended use. Let’s explore the specific GST rates on LPG cylinders.
GST Rate and HSN Code for LPG Cylinders
LPG cylinders fall under the Harmonized System of Nomenclature (HSN) code 2711, which covers petroleum gases and other gaseous hydrocarbons. The specific HSN codes and corresponding GST rates on LPG are as follows:
HSN Code |
Description |
GST Rate |
|---|---|---|
| 27111910 |
Domestic LPG cylinders (conforming to IS 4576) |
5% |
| 27111920 |
Commercial LPG cylinders (conforming to IS 14861) |
18% |
The concessional 5% GST rate on LPG cylinders for domestic use ensures affordability for households, while the 18% rate for commercial use aligns with the standard tax duties for industrial products.
ITC Claims on LPG Cylinder Purchases
Businesses purchasing LPG cylinders for commercial purposes can claim Input Tax Credit (ITC) on the GST paid. To be eligible for ITC claims, businesses must:
- Be registered under the GST regime
- Maintain proper invoices and documentation for LPG cylinder purchases
- Use the LPG cylinders for the furtherance of their business operations
Domestic LPG consumers cannot claim ITC as the cylinders are intended for personal use.
Key Highlights of the GST Rules on Gas
- Domestic LPG cylinders attract a concessional GST rate of 5%
- Commercial LPG cylinders are taxed at a higher rate of 18%
- Businesses can claim ITC on commercial LPG cylinder purchases
- Domestic LPG consumers are not eligible for ITC claims
How does GST Affect Cooking Gas?
The introduction of GST has had a slight impact on the prices of domestic LPG cylinders. In some states that previously did not levy any tax on green fuel, consumers may see a price increase of around ₹12 to ₹15 per cylinder due to the 5% GST rate on LPG. However, the concessional rate ensures that the price increase is minimal and cooking gas remains affordable for households.
GST’s Impact on Commercial Gas and Auto LPG
The implementation of the 18% GST rate on commercial LPG cylinders has actually led to a price reduction of approximately ₹69 per cylinder. Before GST, commercial LPG cylinders attracted various taxes and charges amounting to 22.5%, including 8% excise duty and 14.5% Value Added Tax (VAT). The standardized 18% GST rate has streamlined the tax structure, making commercial LPG more cost-effective for businesses.
GST’s Impact on Oil and Gas Companies in India
The introduction of GST has brought about significant changes for the oil and gas industry in India:
1. Upstream sector:
Companies involved in exploration, drilling, and production face challenges as their output (crude oil and natural gas) is not covered under GST, while their inputs attract GST. This leads to an accumulation of input tax credit that cannot be offset against output liability.
2. Midstream sector:
Pipeline transportation of crude oil and natural gas benefits from GST as companies can claim ITC on their inputs. However, the exclusion of five petroleum products from GST affects the sector’s overall efficiency.
3. Downstream sector:
Refineries face a dual tax structure where inputs (crude oil) are outside GST, while outputs are a mix of GST and non-GST products, leading to complexity in tax compliance and credit utilization.
4. Work contracts:
The GST rate on work contracts in the oil and gas sector has increased from 12% to 18% in 2022, impacting the cost of construction, maintenance, and infrastructure development projects.
Despite these challenges, the oil and gas industry is adapting to the new tax regime and working towards streamlining processes to ensure compliance and efficiency.
Frequently Asked Questions (FAQs):
1. What is the GST that is levied on domestic LPG?
The GST rate on LPG cylinders for domestic use is 5%.
2. What is the GST that is levied on non-domestic LPG?
Commercial LPG cylinders attract a GST rate of 18%.
3. Are there any exemptions for GST on LPG used for household purposes?
No, there are no exemptions for GST on LPG used for household purposes. The concessional 5% rate applies to all domestic LPG cylinders.
4. Does GST on LPG vary between states in India?
No, the GST rates on LPG are uniform across all states in India. The 5% rate applies to domestic cylinders, while the 18% rate applies to commercial cylinders.
5. Can restaurants claim ITC on LPG used for cooking?
Yes, restaurants and other businesses can claim Input Tax Credit (ITC) on the GST paid for commercial LPG cylinders used for cooking purposes.
