Amid the rising fuel prices, a message has gone viral with the claim that the Central government levies only 5 per cent tax on an LPG cylinder whereas the state charges 55 per cent.
Showing a price break-up, the viral post on social media obliquely claims that state government taxes are the main reason behind the whopping price of LPG in the country.
For a domestic LPG cylinder, 5 per cent GST is charged, which is equally divided between Centre and state. So, there is no disparity in the taxes levied on an LPG cylinder. The viral message displays a false figure which has no connection to the real tax system.
The viral claim and the break-up of the tax are vague as it does not specify whether it is about domestic LPG or commercial. It also does not specify which state’s tax system it is talking about. The LPG prices vary from state to state.
Several factors determine LPG pricing in India. It is calculated based on a formula — import parity price (IPP). The IPP is determined based on LPG prices in the international market, as the fuel is mostly imported into the country.
The IPP, based on Saudi Aramco’s LPG price, includes the FOB (free on board) price, ocean freight, insurance, customs duties, port dues, etc.
This price, quoted in dollars, is then converted to rupees then the cost of inland freight, marketing costs and margins charged by the oil companies, bottling charges, dealer commission, and the GST are all added.
The varying cost of transportation in different locations of the country is another factor that also determines the difference in LPG prices on the same day among different states.