The oil ministry is seeking to rationalise taxes on cooking gas sold to all types of consumers in order to block diversion of cylinders meant for domestic use, ministry officials said.
It has written to the finance ministry to impose uniform taxes on cooking gas, or liquefied petroleum gas (LPG), used for domestic and commercial consumption. The finance ministry will take a final call on the demand that was also made in the past.
Gas cylinders meant for domestic use attract no taxes at present while commercial users have to pay a basic customs duty of 5 per cent, additional customs duty of 8 per cent and a central excise duty of 8 per cent.
In addition to central taxes, commercial users have to pay local levies imposed by states. All these duties together make commercial LPG about a third more expensive than domestic.
In Delhi, non-subsidised cooking gas costs about Rs 34 per kilogram while the commercial LPG costs about Rs 45 per kg.
About 90 per cent of the total LPG consumed in the country is used by households, although it is suspected that some subsidised cylinders meant for household use are diverted for commercial purpose.
Besides not having to pay taxes, households also get subsidy on 12 cylinders of gas they consume in a year. The subsidy has sharply shrunk to Rs 64 per cylinder due to a nearly two-thirds fall in crude oil price in the past two years.
In the meantime, the consumption of domestic non-subsidised cylinders has also sharply risen, giving rise to suspicion that some of these cylinders might be getting diverted to commercial use since there is a major price difference between the two types of cylinders due to incidence of taxes.
The oil ministry wants to put an end to these incentives for diversion by having the same price for all cylinders for domestic or commercial use.
One way of doing it could be to scrap all taxes from commercial cylinders, which will result in some loss of revenue that could be offset by lower subsidy due to little need for diversion of domestic cylinders, an official said.
Another possible way could be to impose some tax on domestic cylinders to offset loss due to lowering of taxes on commercial LPG, and since oil prices are low, households may not feel the pinch, he said.
Uniform taxes will also boost the private sector’s presence in LPG distribution. Private sector refiners Reliance Industries and Essar Oil are keen on carving a big share in LPG distribution dominated by the public sector but are hindered by the presence of subsidy and varying tax structure.
India has about 17 crore domestic LPG consumers and plans to add 10 crore consumers in three years as lower oil prices keep cooking gas more affordable and the government’s fuel subsidy burden lighter. LPG consumption in the country grew 8.6 per cent in 2015-16 from that in the previous year. Sergio Romo Womens JerseyShare This