On Thursday, Domestic cooking gas (LPG) price was cut by Rs. 1.46 per cylinder the third straight reduction in a month's time due to tax impact on the reduced market rate of the fuel. A 14.2-kg subsidised LPG cylinder will now cost Rs. 493.53 in the national capital from midnight of Thursday as against Rs. 494.99 currently. This is the third straight monthly reduction in LPG rate. On December 1, subsidised LPG price was cut by Rs. 6.52 per bottle and by Rs. 5.91 on January 1.

IOC said non-subsidised or market priced LPG rates have been cut by a Rs. 30 per cylinder "due to fall in price of LPG in the international market and strengthening of US dollar-rupee exchange rate".

It will now cost Rs. 659 per 14.2-kg cylinder in Delhi. The reduction comes on the back of a steep Rs. 120.50 cut on January 1 and Rs. 133 on December 1. All LPG consumers buy the fuel at market price. The government, however, subsidises 12 cylinders of 14.2-kg each per households in a year by providing the subsidy amount directly in bank accounts of users.

IOC state that "Accordingly, the upfront cash payment by the consumer of domestic LPG will also reduce by Rs. 30 per cylinder. Domestic LPG consumer will now be required to make an upfront cash payment of Rs. 659 a cylinder in place of Rs. 689 per cylinder,".

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As per tax rules, GST on LPG has to be calculated at the market rate of the fuel. The government may choose to subsidise a part of the price but tax will have to be paid at market rates. So, with the fall in market price or non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also come down, leading to the current price reduction.

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