This article provides Clarification of GST on Petroleum Products in India. you will know Why petrol and diesel are not under GST or Why GST is not applicable to petrol in India. You can go through this article to identify whether GST is applicable in your case or not. This article has circular references provided by the government as below:
GST on Petroleum Products in India with its variants:
- Petroleum Gases
- Polybutylene feedstock and Liquefied Petroleum Gas
- Superior kerosene oil with circular updates.
1.GST on the petroleum gases retained for the manufacture of petrochemical and chemical products
Queries have been raised regarding the applicability of GST on the petroleum gases retained for the manufacture of petrochemical and chemical products during the course of continuous supply, such as Methyl Ethyl Ketone (MEK) feedstock, petroleum gases etc.
In order to understand this clearly, we need to see previous clarification on similar issues in past. This product has previous circular reference Nos. 12/12/2017-GST dated 26th October 2017 and 29/3/2018-GST dated 25th January 2018.
As per the general practice, oil refineries supply petroleum gases on a continuous basis to the manufacturers of petrochemical and chemical products. Further, the supplier is supplying these gases through a dedicated pipeline to the manufacturers. At the same time, the receiver retains part the of raw material and whatever quantity remains will get a return back to the oil refineries. Therefore taxpayers require clarification on which quantity the GST will be applicable:
- On Whole Quantity of the principal raw material supplied by the oil refinery
- On the net quantity kept by the manufacturers of petrochemical and chemical products.
The GST Council in its 28th meeting held on 21.7.2018 debated this issue and suggested the issuance of a general clarification for the petroleum sector in such trades.
GST Council Suggestions
GST will be payable by the refinery on the value of a net quantity of petroleum gases available for the manufacture of petrochemical and chemical products.
Final Conclusion
Therefore, it is clear that, in the said cases, GST will be payable by the refinery only on the net quantity of petroleum gases available for the recipient manufacturer for the manufacture of petrochemical and chemical products.
However, the refinery will be liable to pay GST on such return quantity of petroleum gases, when the same will get supplied to any other person.
On the other hand, in cases involving the supply of goods, Where the balance quantity of feedstock remains in the recipient stock and the supplier takes back the remaining material. The net billing will be done on the amount of balance quantity remaining for the recipient.
Circular Reference: Circular No.53/27/2018-GST dt.09.08.2018
2. GST on Polybutylene feedstock and Liquefied Petroleum Gas.
(When manufacturer retains to produce Poly Iso Butylene and Propylene or Di-butyl para Cresol.)
Queries arise, whether the applicability of GST on the Polybutylene feedstock and Liquefied Petroleum Gas available for the manufacture of Poly Iso Butylene and Propylene or Di-butyl para Cresol.
The 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 feedstock respectively. The oil refineries supply these items to them on a continuous basis through private pipelines. However, a portion of the raw material is retained by these manufacturers and the remaining quantity is returned back to the oil refineries.
The issue has arisen as to whether in this transaction GST will be leviable on the whole quantity of the principal raw materials supplied by the oil refinery or on the net quantity available for the manufacturers of Propylene or Di-butyl para Cresol and Poly Iso Butylene.
The GST Council in its 25th meeting held on 18.1.2018 discussed the said issue. It recommends the issuance of a clarification stating that in such trades.
GST will be payable by the refinery on the Value of the net quantity of polybutylene feedstock and liquefied petroleum gas. This is only on retained gas for the manufacture of Poly Iso Butylene and Propylene or Di-butyl Para Cresol.
Therefore it is clear, GST will be payable by the refinery company only. The refinery will pay GST only on the net quantity of Polybutylene feedstock and Liquefied Petroleum Gas. Also, it is to note that GST will be payable only on the quantity that remains with the manufacturer. This quantity is normally used for the manufacture of Poly Iso Butylene and Propylene or Di-butyl para Cresol
However, the refinery is liable to pay GST on such return quantity of Polybutylene feedstock and Liquefied Petroleum Gas, at the time of supply to any other person.
Circular Ref. Circular No. 29/3/2018-GST dt.25.01.2018
3. GST on the superior kerosene oil [SKO] kept for the manufacture of Linear Alkyl Benzene [LAB]
It has been brought to notice that LAB manufacturers receive superior Kerosene oil (SKO) from, a refinery, say, Indian Oil Corporation (IOC). Thereafter, they extract n-Paraffin (C9-C13 hydrocarbons) from SKO and return back the remaining SKO to the refinery. Now the issue has arisen as to whether in this transaction GST will be leviable on SKO sent by IOC for extracting n-paraffin.
Or
Only on then-paraffin quantity extracted by the LAB manufacturers.?
Further, taxpayers were raising doubts as -. Whether the return of remaining Kerosene by LAB manufacturers will separately attract GST in such a transaction.
Council’s Statement: After examination of the said matter
LAB manufacturers normally receive superior kerosene oil [SKO] from a refinery through a private pipeline. This is on average about 15 to 17% of the total quantity of SKO gets retained from the refinery. The balance quantity ranging from 83%-85% gets returned back to the refinery.
The balance SKO is towards extraction of Normal Paraffin, which is used for manufacturing of LAB. In this transaction, consideration is payable by LAB manufacturers only on the balance quantity of SKO (n-paraffin).
In this situation, the GST Council in its 22nd meeting held on 06.10.2017 debated the issue.
During the meeting councils suggestions are as below:
GST will be payable by the refinery on the value of the net quantity. This quantity shall include only of superior kerosene oil (SKO} available for the manufacturer. Further, the manufacture of products includes only Linear Alkyl Benzene (LAB).
Therefore, it is clear that, in the aforesaid case, GST will be payable by the refinery only. Also, only the net quantity of superior kerosene oil (SKO) is retained for the manufacturer.
Circular Ref. Circular No. 12/12/2017-GST dt.26.10.2017
GST on petroleum latest news
26 JUN 2019: The Union Minister for Petroleum and Natural Gas Shri Dharmendra Pradhan in a written reply in the Rajya Sabha today said the GST council is the decision maker to levy GST on petroleum products.
As per his written reply, Article 279A (5) of the Constitution provides that the Goods and Services Tax Council shall recommend the date on which goods and services tax shall be levied on petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel.
Further, according to section 9(2) of the CGST Act, the inclusion of all excluded petroleum products, including petrol and diesel in GST will require the recommendation of the GST Council.
All the States and Union Territories (UT) with Legislature represent the GST Council by their Minister-in-charge of Finance or Taxation. Therefore, The GST council wi
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