Clarification regarding applicability of GST on the superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB] - GST - States - 06/2017-2018-GST

Government of Goa Department of Commercial Taxes Vikrikar Bhavan, Panaji - Goa - 403001 CCT/26-4/2017-2018/5143 Dated: 7th February, 2018 CIRCULAR (No. 06/2017-2018-GST) Subject: Clarification regarding applicability of GST on the superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB]- Regarding. Briefly stated, references have been received related to applicability of GST on the superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB]. 2. In this context, LAB manufacturers have stated that they receive superior Kerosene oil (SKO) from, a refinery, say, Indian Oil Corporation (IOC). They extract n-Paraffin (C9-C13 hydrocarbons) from SKO and return back the remaining of SKO to the refinery. In this context, the issue has arisen as to whether in this transaction GST would be levied on SKO sent by IOC for extracting n-paraffin or only on the n-paraffin quantity extracted by the LAB manufactures. Further, doubt have also been raised as to whether the return of remaining Kerosene by LAB manufactures would separately attract GST in such transaction. 3. The matter was examined LAB manufacturers generally receive superior kerosene oil [SKO] from a refinery through a dedicate pipeline, on an average about 15 to 17% of the total quantity of SKO received from refinery is retained and balance quantity ranging from 83%- 85% is returned back to refinery. The retained SKO is towards extraction of Normal Paraffin, which is used in the manufacturing of LAB. In this transaction consideration is paid by LAB manufactures only on the quantity of retained SKO (n-paraffin). 4. In this context, the GST Council recommended for issuance of a clarification that in this transaction GST will be payable by the refinery on the value of net quantity of superior kerosene oil (SKO) retained for the manufacture of Linear Alkyl Benzene (LAB). 5. Accordingly, it is here by clarified that, in aforesaid case, GST will be payable by the refinery only on the net quantity of superior kerosene oil (SKO) retained for the manufacture of Linear Alkyl Benzene (LAB). Though, refinery would be liable to pay GST on such returned quantity of SKO, when the same is supplied by it to any other person. 6. This clarification is issued in the context of Goods Service Tax (GST) law only and past issues, if any, will be dealt in accordance with the law prevailing at the material time. (Dipak M. Bandekar) Commissioner of State Tax Note: Similar circular is issued under Central Goods and Service Tax Act, 2017 by Tax Research Unit, Dept. of Revenue, Ministry of Finance, GOI vide Circular No. 12/12/2017-GST dated 26th October, 2017.