CIRCULAR NO-53/2018-F.No.354/255/2018-TRU (Part-2)-Circular No. 53/27/2018-GST dated 09.08.2018 i.r.o. clarification regarding applicability of GST on petroleum gases retained for the manufacture of petrochemical and chemical products

Circular No.53/27/2018-GST

F.No.354/255/2018-TRU (Part-2)
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)

North Block, New Delhi
Dated, 9th August, 2018


Principal Chief Commissioners/Principal Directors General,
Chief Commissioners/Directors General,
Principal Commissioners/Commissioners,
All under CBIC.


Subject: Clarification regarding applicability of GST on the petroleum gases retained forthe manufacture of petrochemical and chemical products – regarding.

References have been received regarding the applicability of GST on the petroleumgases retained for the manufacture of petrochemical and chemical products during the courseof 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 specificproducts have already been issued vide circular Nos. 12/12/2017-GST dated 26th October, 2017and 29/3/2018-GST dated 25th January, 2018. These circulars apply mutatis mutandis to othercases involving same manner of supply as mentioned in these circulars. However, referenceshave again been received from some of the manufacturers of other petrochemical and chemicalproducts for issue of clarification on applicability of GST on petroleum gases, which aresupplied by oil refineries to them on a continuous basis through dedicated pipelines, while aportion 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 towhether in this transaction GST would be leviable on the whole quantity of the principal rawmaterials supplied by the oil refinery or on the net quantity retained by the manufacturers ofpetrochemical and chemical products.

3. The GST Council in its 28th meeting held on 21.7.2018 discussed this issue andrecommended for issuance of a general clarification for petroleum sector that in suchtransactions, GST will be payable by the refinery on the value of net quantity of petroleumgases retained for the manufacture of petrochemical and chemical products.

Circular No.53/27/2018-GST

4. Accordingly, it is hereby clarified that, in the aforesaid cases, GST will be payable bythe refinery only on the net quantity of petroleum gases retained by the recipient manufacturerfor the manufacture of petrochemical and chemical products. Though, the refinery would beliable to pay GST on such returned quantity of petroleum gases, when the same is supplied byit to any other person. It is reiterated that this clarification would be applicable mutatis mutandison other cases involving supply of goods, where feed stock is retained by the recipient andremaining residual material is returned back to the supplier. The net billing is done on theamount retained by the recipient.

5. This clarification is issued in the context of the Goods and Service Tax (GST) law onlyand 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)


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