OGRA LPG Price Reduction: Tax Implications for Businesses

The Oil and Gas Regulatory Authority (OGRA) has issued a price determination for Liquefied Petroleum Gas (LPG), effective May 1, 2025, aligning with federal government guidelines, a move with key tax implications for businesses and consumers. Our tax law firm advises clients to assess the impact of these price changes on taxable expenses and compliance requirements.

LPG producer prices for May 2025 are set at Rs203,861.82 per ton, or Rs2,405.57 per 11.8 kg cylinder, reflecting a decrease of Rs3,203.32 per ton (or Rs37.80 per cylinder) from April 2025 rates. For consumers, the price is now Rs245,161.82 per ton, or Rs2,892.91 per cylinder, also down by Rs3,203.32 per ton (or Rs37.80 per cylinder), with the price per kilogram dropping by Rs3.20.

OGRA attributes the price reduction to a 1.8% decrease in the Saudi Aramco-CP price, despite a 0.22% increase in the US dollar exchange rate, resulting in a 1.28% decrease in consumer prices per cylinder. From a tax law perspective, this cost reduction impacts deductible expenses for businesses using LPG, such as in manufacturing or hospitality, under Section 29 of the Income Tax Ordinance. Clients must ensure accurate expense reporting in income tax returns to reflect these revised costs, potentially lowering taxable income.

Additionally, businesses involved in LPG distribution must verify compliance with Federal Board of Revenue (FBR) regulations on sales tax, typically at 17%, and withholding tax on transactions, ensuring proper documentation to avoid penalties. The price drop may also affect input tax credits for VAT-registered entities, requiring careful tax reconciliation.

Our firm recommends clients review LPG-related expenses, adjust tax filings to account for the price reduction, and ensure FBR compliance, optimizing their tax position in light of these changes.