Circular No 12/12/2017 GST

Seeks to clarify the applicability of GST on the superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB].

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,
All under CBEC.

Madam/Sir,
Subject: Clarification regarding applicability of GST on the superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB]– Regarding.

Briefly stated, references have been received related to applicability of GST on the
superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB].

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)
Technical Officer (TRU)
Email: amitsingh.1289@gov.in

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