Looking for expert help with GST and income tax for LPG gas agency distributors India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- LPG sold to household domestic consumers is 5% GST; LPG for anyone else, such as restaurants, hotels and shops, is 18% (Notification 9/2025-CT(Rate), Sch I S. No. 209 and Sch II S. No. 30, from 22 September 2025).
- Gas stoves, regulators and rubber hoses you sell over the counter are 18%.
- Household and NDEC LPG needs no e-way bill (Rule 138(14)(a), Annexure S. No. 1). Commercial LPG above Rs 50,000 a consignment does.
- A refundable cylinder deposit is not taxable unless you keep it as payment (Section 2(31) proviso, CGST Act).
- Your turnover is the full sale value of refills, so tax audit starts at Rs 1 crore unless cash receipts and payments both stay within 5%.
What is the GST rate on LPG cylinders sold by a gas agency? Domestic LPG supplied to household consumers is taxed at 5% GST (2.5% CGST plus 2.5% SGST) under S. No. 209 of Schedule I, Notification 9/2025-Central Tax (Rate). LPG supplied to commercial customers such as restaurants and hotels is 18% under Schedule II, S. No. 30. Stoves, regulators and hoses are also 18%.
An LPG distributorship looks simple from the outside: refills come in from the oil company, go out to households and businesses, and empties come back. The tax side has more moving parts. One godown carries goods at two rates, depending on who the customer is. Deposits come in that aren't sales. Household refills move without e-way bills while commercial loads need them. And because your turnover counts the full price of every refill, you can cross the income tax audit limit long before your profit looks large. This guide works through each of these for FY 2025-26 (AY 2026-27), with the matching sections of the Income-tax Act 2025 that apply from 1 April 2026. If you also run a petrol pump, our GST on petrol and diesel guide explains why LPG is under GST while petrol is not.
Which GST rate goes on each thing a gas agency sells?
The rate on LPG depends on the customer, not on the cylinder. Notification 9/2025-Central Tax (Rate) splits it three ways:
Comparison
GST on What an LPG Distributor Sells (from 22 September 2025)
| What you supply | HSN / SAC and entry | GST |
|---|---|---|
| LPG for supply to household domestic consumers | 2711 12 00, 2711 13 00, 2711 19 10; Sch I S. No. 209 | 5% |
| LPG to non-domestic exempted category (NDEC) customers, by IOCL, HPCL or BPCL | Same headings; Sch I S. No. 208 | 5% |
| LPG to all other customers (restaurants, hotels, shops, factories) | 2711; Sch II S. No. 30 | 18% |
| Gas stoves and hot plates of iron or steel | 7321; Sch II S. No. 299 | 18% |
| Pressure regulators and valves | 8481; Sch II S. No. 466 | 18% |
| Rubber LPG hoses | 4009; Sch II S. No. 135 | 18% |
| Steel gas cylinders (if ever sold outright) | 7311; Sch II S. No. 289 | 18% |
| Installation service billed on its own | 9987; Notif 11/2017 S. No. 25 | 18% |
Source: Notification 9/2025-Central Tax (Rate), Schedules I (2.5% CGST) and II (9% CGST), in force 22 September 2025; Notification 11/2017-Central Tax (Rate), S. No. 25. Add equal SGST, or charge IGST at the full rate on inter-State sales.
The NDEC line needs care. Entry 208 covers LPG for NDEC customers (institutions such as hospitals and schools that the oil companies supply at domestic-type terms) "by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum Corporation Limited". Entry 209, for households, names no supplier. If you deliver to an NDEC customer, follow how your oil company bills that supply and keep its documents. We haven't found a CBIC clarification on how entry 208 applies when a distributor makes the sale.
Here's how two bills look side by side. The values are for illustration; use the price your oil company fixes for your market.
| Household refill | Commercial 19 kg refill to a restaurant | |
|---|---|---|
| Taxable value | Rs 860 | Rs 1,600 |
| CGST | 2.5% = Rs 21.50 | 9% = Rs 144 |
| SGST | 2.5% = Rs 21.50 | 9% = Rs 144 |
| Bill total | Rs 903 | Rs 1,888 |
Delivery charges. When you deliver a refill and bill delivery with it, that's a composite supply, and Section 8(a) of the CGST Act taxes the whole at the rate of the principal supply, the LPG. So delivery on a household refill goes at 5%, and on a commercial refill at 18%.
Cylinder and regulator deposits. A new connection usually comes with a refundable deposit. Under the proviso to Section 2(31) of the CGST Act, a deposit given for a supply isn't payment for that supply unless the supplier applies it as consideration. You don't charge GST when you take a refundable deposit, and you return it on surrender. If a deposit is ever kept as payment, for a lost cylinder say, GST becomes due at that point.
When does an LPG distributor need GST registration?
The basic limit is Rs 20 lakh of aggregate turnover in a financial year, or Rs 10 lakh in a special category State that hasn't raised it (Section 22(1), CGST Act). A Rs 40 lakh limit exists only for those "engaged in exclusive supply of goods" (Notification 10/2019-Central Tax), and Telangana, along with nine other States and UTs, didn't adopt it.
In practice this decision is made for you. Your oil company supplies you as a registered dealer, commercial customers want your GSTIN on the bill for input tax credit (ITC), and refill turnover passes Rs 40 lakh quickly: at Rs 900 a refill, that's about 4,450 refills a year, or under 13 a day. Our GST registration service files the application and the amendments when you add a godown or showroom address. Our guide to the Rs 20 lakh and Rs 40 lakh limits covers the edge cases.
Composition is rarely an option. The scheme needs previous-year turnover of Rs 1.5 crore or less (Notification 14/2019-Central Tax) and no inter-State outward supplies (Section 10(2)(c)). Most agencies cross Rs 1.5 crore, and commercial buyers can't claim credit on a composition dealer's bill of supply. Our composition scheme guide has the full conditions.
Step-by-Step Guide
Monthly GST Routine for an LPG Gas Agency
Split sales by customer type
Tag every refill as household (5%), NDEC (as your oil company bills it), or commercial (18%). The cylinder size doesn't decide the rate.
Bill hardware at 18%
Stoves, regulators, hoses and separately billed installation are 18%. Keep refundable deposits off the taxable value.
E-way bills for commercial loads
Household and NDEC LPG and empty cylinders are exempt. Commercial LPG above Rs 50,000 a consignment needs Part A of EWB-01 before it moves (Rule 138(1)).
Match ITC with GSTR-2B
Check the oil company's invoices, rent, vehicle repairs and hardware purchases against GSTR-2B before you file.
File GSTR-1 and GSTR-3B
Report 5% and 18% sales on separate lines so the rate-wise totals reconcile with your books at year end.
Source: Sections 2(31), 8, 10 and 22, CGST Act; Rule 138, CGST Rules; Notifications 9/2025-CT(Rate), 10/2019-CT and 14/2019-CT
Do LPG distributors need e-way bills?
Not for household refills. Rule 138(14)(a) of the CGST Rules says no e-way bill is needed for goods in its Annexure, and S. No. 1 of that Annexure is "Liquefied petroleum gas for supply to household and Non domestic exempted category (NDEC) customers". Rule 138(14)(o) adds empty LPG cylinders moved for reasons other than supply, such as returning empties to the bottling plant.
Commercial LPG gets no exemption. A delivery van carrying 30 commercial refills at Rs 1,600 each is a Rs 48,000 consignment and needs no e-way bill. Load 35 and it's Rs 56,000, so Part A of Form GST EWB-01 must be filed before the van leaves (Rule 138(1)). Keep household and commercial loads on separate challans so the exemption is easy to show at a check. Our e-way bill guide walks through the portal.
ITC on delivery vehicles. Section 17(5)(a) of the CGST Act blocks credit on motor vehicles for transporting persons with up to 13 seats. Goods carriers that deliver cylinders aren't in that block, so GST on the vehicle and its repairs is claimable if the usual conditions are met. Because household refills go out at 5% while rent and repairs carry 18%, some credit can build up in your ledger. That's normal for a mostly domestic agency. Our GST return filing service reconciles it each month.
How is an LPG gas agency's income taxed for FY 2025-26?
Start with what counts as turnover. If your dealership has you buying refills from the oil company and reselling them (your purchase invoices will show this), your turnover is the full sale value of every refill, not your margin. That pushes most agencies past the presumptive and audit limits early.
Presumptive tax under Section 44AD. A resident individual, HUF or partnership firm (not an LLP) can declare 6% of receipts by bank transfer, UPI or other prescribed electronic mode and 8% of the rest as profit, if turnover is up to Rs 2 crore, or Rs 3 crore where cash receipts are within 5% (Section 44AD, Income-tax Act 1961). From tax year 2026-27 this is Section 58(2), Table S. No. 1, of the Income-tax Act 2025. Our Section 44AD guide covers the conditions.
Example 1: a smaller agency, turnover Rs 1.8 crore, Rs 18 lakh (10%) in cash. Cash is above 5%, so the limit is Rs 2 crore, and the agency qualifies.
- Deemed profit: 6% of Rs 1,62,00,000 (Rs 9,72,000) plus 8% of Rs 18,00,000 (Rs 1,44,000), so Rs 11,16,000.
- Tax under the new regime: Rs 20,000 (Rs 4-8 lakh at 5%) plus Rs 31,600 (Rs 3,16,000 at 10%), so Rs 51,600.
- Income is within Rs 12 lakh, so the Section 87A rebate of up to Rs 60,000 wipes it out. Tax: nil, if this is the only income.
The catch is the alternative. If this agency doesn't declare under 44AD, its turnover of Rs 1.8 crore is above Rs 1 crore and its cash is above 5%, so its accounts must be audited under Section 44AB(a). And if it declares 44AD this year and a lower profit in any of the next five, Section 44AD(4) bars 44AD for five years, with an audit required while income is above the basic exemption limit.
Example 2: a larger agency selling 4,000 refills a month at Rs 900. Turnover is 4,000 x Rs 900 x 12 = Rs 4.32 crore. That's above Rs 3 crore, so 44AD is out, and you're taxed on actual profit from your books.
- If cash receipts or cash payments exceed 5%, the audit limit is Rs 1 crore, and an audit is required.
- If both stay within 5%, the limit is Rs 10 crore (first proviso to Section 44AB(a)), and no audit is needed at Rs 4.32 crore.
Moving doorstep collections to UPI therefore changes more than convenience. From tax year 2026-27 the same thresholds sit in Section 63(1), Table S. No. 1, of the Income-tax Act 2025. Our Section 44AB thresholds guide explains Form 3CD, and our ITR filing service prepares the return either way.
What TDS applies to an LPG distributor?
On your purchases from the oil company (Section 194Q). If your turnover in the previous year was above Rs 10 crore, you're a "buyer" and must deduct 0.1% on purchases from a seller above Rs 50 lakh in the year. An agency buying all its refills from one oil company crosses Rs 50 lakh early in the year. Section 194Q(5) switches it off where another TDS section applies or tax is collected under Section 206C. Our Section 194Q guide covers the mechanics.
On your sales to large commercial buyers. A hotel chain or factory with turnover above Rs 10 crore that buys more than Rs 50 lakh of commercial LPG from you in a year deducts 0.1% on the excess. Check Form 26AS each quarter and claim that credit in your return.
On godown rent (Section 194-I). If you run the agency as a firm or company, or as an individual or HUF whose business turnover last year was above Rs 1 crore, deduct 10% on rent for land or a building once rent exceeds Rs 50,000 for a month. Our TDS on rent guide covers the Rs 50,000 rule.
On hired delivery vehicles (Section 194C). Payments to a transporter or a hired tempo for carrying cylinders are contract payments. Deduct 1% (individual or HUF contractor) or 2% (others) once a single bill is above Rs 30,000 or the year's total is above Rs 1 lakh, if you're a firm or company, or an individual or HUF with business turnover above Rs 1 crore last year. Under Section 194C(6), you don't deduct for a contractor who owns ten or fewer goods carriages and gives you a declaration with PAN.
From 1 April 2026 these move to Section 393 of the Income-tax Act 2025: Table S. No. 8(ii) of sub-section (1) for purchase of goods, S. No. 2(ii) for rent, S. No. 6(i) for contractors, and Table S. No. 8 of sub-section (4) for the small-transporter relief. Our TDS filing service handles the quarterly returns.
Common mistakes LPG distributors make
- Taxing by cylinder size. The rate follows the customer. A refill sold to a restaurant is 18% whatever its size, and a refill sold to a household is 5%.
- Charging GST on refundable deposits. A deposit is not consideration until you keep it as payment.
- Sending commercial loads without e-way bills. The Annexure exemption covers household and NDEC LPG only.
- Judging the audit limit by profit. Turnover is the full refill value. Rs 1 crore of turnover can mean a modest profit and still need an audit if cash crosses 5%.
- Missing Section 194Q once turnover passes Rs 10 crore. The obligation starts in the year after you cross it, on purchases above Rs 50 lakh.
How Tax Garden helps LPG gas agencies
We set up your billing so household, NDEC and commercial sales sit at the right rates, and file GSTR-1 and GSTR-3B with ITC matched through our GST return filing service. Our accounting and bookkeeping service keeps the books an agency above Rs 3 crore needs. At year end we prepare your return, with every TDS credit from Form 26AS claimed, through our ITR filing service. If you also distribute packaged goods, see our GST guide for FMCG distributors.
