Central Tax Circulars

CGST Circular 53/2018

To

Principal Chief Commissioners/Principal Directors General,
Chief Commissioners/Directors General, Principal
Commissioners/Commissioners, All under CBIC.

Madam/Sir,

Subject: Clarification regarding applicability of GST on the petroleum
gases retained for the manufacture of petrochemical and chemical products
– regarding.

1. References have been received regarding the applicability of GST on
   the petroleum
   gases retained for the manufacture of petrochemical and chemical products
   during the course of continuous supply, such as Methyl Ethyl Ketone (MEK)
   feedstock, petroleum gases etc.

2. In this context, it may be recalled that clarifications on similar
   issues for specific
   products have already been issued vide circular Nos. 12/12/2017-GST dated
   26th October, 2017 and 29/3/2018-GST dated 25th January, 2018. These
   circulars apply mutatis mutandis to other cases involving same manner of
   supply as mentioned in these circulars. However, references have again
   been received from some of the manufacturers of other petrochemical and
   chemical products for issue of clarification on applicability of GST on
   petroleum gases, which are supplied by oil refineries to them on a
   continuous basis through dedicated pipelines, while a portion of the raw
   material is retained by these manufacturers (recipient of supply), and
   the remaining quantity is returned to the oil refineries. In this regard,
   an issue has arisen as to whether in this transaction GST would be
   leviable on the whole quantity of the principal raw materials supplied by
   the oil refinery or on the net quantity retained by the manufacturers of
   petrochemical and chemical products.

3. The GST Council in its 28
   th meeting held on 21.7.2018 discussed this issue and recommended for
   issuance of a general clarification for petroleum sector that in such
   transactions, GST will be payable by the refinery on the value of net
   quantity of petroleum gases retained for the manufacture of petrochemical
   and chemical products.

4. Accordingly, it is hereby clarified that, in the aforesaid cases,
   GST will be payable by the refinery only on the net quantity of
   petroleum gases retained by the recipient manufacturer
   for the manufacture of petrochemical and chemical products. Though, the
   refinery would be liable to pay GST on such returned quantity of
   petroleum gases, when the same is supplied by it to any other person. It
   is reiterated that this clarification would be applicable mutatis
   mutandis on other cases involving supply of goods, where feed stock is
   retained by the recipient and remaining residual material is returned
   back to the supplier. The net billing is done on the amount retained by
   the recipient.

5. This clarification is issued in the context of the Goods and Service
   Tax (GST) law only
   and past issues, if any, will be dealt in accordance with the law
   prevailing at the material time.