Finance Minister P Chidambaram said that there would be zero customs duty and VAT on non-subsidised cylinders.
Observers say the government's decision is purely based on the fierce opposition it has received from all quarters, after it had announced hike in diesel prices and put a cap on LPG cylinder recently.
The diesel price has been increased by Rs 5 a litre and each household will get only six domestic LPG (14.2 Kg) cylinders per annum at a subsidised rate.
The latest decision of government on fuel price hike has come under immense criticism. Not only the opposition parties, even its key allies vehemently criticised government's recent price hike measures. Congress-led UPA government has already paid a heavy price for its economic measures, including allowing FDI in multi-brand retail and other sectors. Its key ally Trinamool Congress has withdrawn its support to the coalition government leaving it 17 seats short of the halfway mark in Parliament.
Moreover, opposition parties had organised a nationwide protest on Thursday over government's reform measures, calling them as anti-poor.
Meanwhile, several Congress-ruled states had earlier announced that they would raise the cap on subsidised LPG cylinders from six to nine.
Chidambaram had welcomed the decision of the states to raise the cap on maximum number of subsidised LPG cylinders entitled to every household in the country from six to nine.