VAT shock causing 'direct loss' to LPG consumers in MP

Residents in Madhya Pradesh will now have to pay extra for buying LPG cylinders after linking their LPG connections to bank accounts under the Centre’s direct benefit transfer.

Residents in Madhya Pradesh will now have to pay extra for buying LPG cylinders after linking their LPG connections to bank accounts under the Centre’s direct benefit transfer (DBT).

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A 5% value added tax (VAT) imposed by the state government on cylinders would now force consumers across the state to pay Rs 17 more per refill after linking to DBT, said an LPG dealer Friday.

"At present, the market rate of domestic LPG cylinder is about Rs 790 while the subsidised cylinder costs Rs 455. Consumers who have not applied for DBT scheme are paying Rs 23 as VAT, but those who are receiving subsidy directly into their bank account are paying a VAT of Rs 40,” said an Indane Gas dealer on condition of anonymity fearing government action.

"So they end up paying Rs 17 more as the amount refunded as subsidy does not include state taxes."

"The state government may be right on technical grounds to charge VAT on the billing price, but people belonging to lower income group are feeling the pinch," the dealer added.

Madhya Pradesh is among the few states in the country that is earning an additional income at the consumers' expense, the dealer said.

Under the DBT scheme, subsidised cylinders are bought by consumers on non-subsidised rates and the amount of subsidy is transferred into consumers' bank accounts directly.

However, at current market price, the consumers are getting Rs 17 less, as the Centre does not reimburse the state taxes, he said.

State finance minister Jayant Malaiya, during a media interaction had declined the possibility of waiving off VAT on LPG cylinder in near future, clearly indicating that the state would continue to burden the consumer.

This was after Union petroleum minister Dharmendra Pradhan wrote to chief ministers of several states including Madhya Pradesh, not to levy VAT on LPG so that any consumers could avail benefits price dips.

While most states have complied, Madhya Pradesh is one of the few states that are charging VAT on the billing price.

Prices of LPG are regularly revised in accordance with international prices of fuel.