Clarification regarding applicability of GST on the petroleum gases retained for the manufacture of petrochemical and chemical products. - GST - States - 053/27/2018-GST

Circular No.53/27/2018-GST No. 12-25/2018-19-EXN-GST-(575)-6604-6621 Government of Himachal Pradesh, Excise and Taxation Department To 1. The Additional/Jt. Commissioner of State Taxes and Excise, (South Zone, North Zone, Central Zone), Shimla, Palampur, Mandi, H.P. 2. The Joint Commissioner of State Taxes and Excise, Flying Squad, (Central Zone, North Zone, South Zone), Una, Palampur, Parwanoo, H.P. 3. The Dy. Commissioner of State Taxes and Excise, Shimla, Solan, BBN Baddi, Sirmour, Bilaspur, Hamirpur, Mandi. Kullu, Chamba, Kangra, Revenue Distt Nurpur and Una, H.P 4. The Asstt. Commissioner of State Taxes and Excise, Incharge Distt. Kinnour, H.P Dated Shimla-9 13th March, 2019. Madam/Sir, Subject: Clarification regarding applicability of GST on the petroleum gases retained for the manufacture of petrochemical and chemical products. Various doubts have been arisen 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 and 29/3/2018-GST. 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 28th 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. 6. This circular shall come into force w.e.f. 09.08.2018. 7. Difficulty, if any, in the implementation of this circular may be brought to the notice of this office immediately. (Rajeev Sharma, IAS) Commissioner of State Taxes and Excise, Himachal Pradesh