Madam/Sir,

References have been received regardingthe applicability of GST on the petroleum gases retained for the manufacture of petrochemical and chemical productsduring 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 26thOctober, 2017 and 29/3/2018-GST dated 25thJanuary, 2018. These circularsapply mutatis mutandisto other cases involving same manner of supply as mentionedin these circulars.However,referenceshave again beenreceived from some of the manufacturersof other petrochemical and chemical productsfor issue of clarification on applicability of GST on petroleum gases,which are supplied by oil refineriesto themon a continuous basis throughdedicated pipelines,whilea portion of the rawmaterial is retained by these manufacturers(recipient of supply),andthe remaining quantity is returned to the oil refineries. Inthis 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 ofpetrochemical and chemical products.

3. The GST Council in its 28thmeetingheld on 21.7.2018discussed thisissue and recommended for issuance of a general clarification for petroleum sector thatin suchtransactions, GST will be payable by the refinery on the value of net quantity of petroleum gasesretained for the manufacture ofpetrochemical 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 gasesretained by the recipient manufacturer for the manufactureof petrochemical and chemical products.Though,therefinery 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 mutandison othercasesinvolving supply of goods, where feed stock is retained by the recipient and remaining residualmaterial 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 andService Tax (GST) law only and past issues, if any, will be dealt in accordance with the law prevailing at the material time.
 

Yours faithfully,
Dr. Ajay K. Chikara
Technical Officer (TRU)

F.No.354/255/2018-TRU(Part-2)