GST applicable on net quantity of petroleum gases retained by manufacturers: CBI

The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular (No.53/27/2018-GST dated 9th August, 2018) to clarify regarding applicability of GST on petroleum gases retained for the manufacture of petrochemical and chemical products.

CBIC had received representations from some manufacturers of petrochemical and chemical products for 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 had 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.

In this regard, CBIC has 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. The refinery would, however, be liable to pay GST on such returned quantity of petroleum gases, when the same is supplied by it to any other person.

It has also been reiterated that this clarification would be applicable mutatis mutandis on other cases involving supply of goods, where feedstock 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.