Circular No. 12/12/2017-GST
F.No.354/117/2017-TRU
(Pt-III)
Government
of India
Ministry
of Finance
Department
of Revenue
(Tax
Research Unit)
North Block, New Delhi
Dated
26th October, 2017
To
Principal
Chief Commissioners/Principal Directors General,
Chief
Commissioners/Directors General,
Principal
Commissioners/Commissioners,
Subject: Clarification
regarding applicability of GST on the superior kerosene oil [SKO] retained for
the manufacture of Linear Alkyl Benzene [LAB]- Regarding.
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 dedicated 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 in its
22nd meeting held on 06.10.2017 discussed the issue and 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.
Yours
faithfully,
(Amit
Kumar Singh)