Centre wants Punjab to change way tax is levied on LPG cylinders

  • Jatinder Kohli, Hindustan Times, Jalandhar
  • Updated: Nov 14, 2014 08:07 IST

Ahead of the re-launch of the direct cash subsidy transfer scheme for Liquefied Petroleum Gas (LPG) cylinders across five districts in Punjab, branded Modified Direct Benefit Transfer for LPG (MDBTL) on November 15, the Centre has written to chief minister Parkash Singh Badal to change the way VAT is charged in the transaction to reduce the net price paid by the consumer.

In the current structure, the Value Added Tax (VAT) is levied at a fixed rate of 4.4% on the net billed amount for each cylinder. For instance, a domestic LPG cylinder is currently billed between Rs 435 and Rs 437 and the government earns 18.4 as VAT per cylinder.

Now, when the MDBTL is rolled out, the bill amount of each cylinder would be Rs 928 and the fixed percentage of tax (4.4%) means the amount to be paid as tax will rise to Rs39.27 per cylinder and people will have to give extra money per cylinder.

The ministry of petroleum and natural gas has written to chief minister Parkash Singh Badal on November 7 and requested that this VAT be changed from the ad-valorem (the system of fixed percentage) to one based on quantity of gas sold (` per kg basis.)

In the letter, union petroleum minister Dharmendra Pradhan has said that the increased tax amount could affect the popularity of the modified scheme as the sales would happen at the market price, burdening consumers with higher VAT. The minister has also sought the

cooperation and active support of the chief minister to make the MDBTL scheme a huge success in the state.

Sources added that at a review of meeting of the DBTL, getting states to migrate from an ad-valorem VAT structure to one based on a specific rate was discussed.

The five districts in which the MDBTL is being launched is Jalandhar, Nawanshahr, Ludhiana, Barnala and Faridkot — in the first phase of the re-launch.

What’s new in the MDBTL

• Under the new system, LPG consumers who do not have Aadhaar cards will also be eligible to get cash subsidy directly in their accounts.

• Consumers will have to give details of their bank accounts to the gas agency concerned to avail the subsidy.

• Those who do not have bank accounts will continue to get LPG supply for a period of three months, the grace period.

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