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Clarification regarding applicability of GST on Polybutylene feedstock and Liquefied Petroleum Gas retained for the manufacture of Poly Iso Butylene and Propylene or Di-butyl para Cresol

CASanjay Kumawat
GST Applies Only on Net Quantity Retained by Manufacturers in Polybutylene and LPG Transactions, Clarifies GST Council The GST Council clarified that in transactions involving the supply of polybutylene feedstock and liquefied petroleum gas from oil refineries to manufacturers of Poly Iso Butylene and Propylene or Di-butyl para Cresol, GST is applicable only on the net quantity retained by the manufacturers. The principal raw materials are supplied continuously through dedicated pipelines, and while a portion is retained by the manufacturers, the remainder is returned to the refineries. The GST liability falls on the refinery based on the value of the materials retained by the manufacturers. (AI Summary)

[Circular No. 29/3/2018-GST, dated 25.01.2018]

Background:

Manufacturers of Propylene or Di-butyl para Cresol and Poly Iso Butylene have stated that the principal raw materials for the manufacture of such goods are Liquefied petroleum gas and Polybutylene feed stock respectively, 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, the remaining quantity is returned to the oil refineries.

Issue:

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?

Classification

GST Council issued a clarification stating that GST will be payable by the refinery on the value of the net quantity of polybutylene feedstock and liquefied petroleum gas retained by the manufacturer.

Goods and Services Tax - GST
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