This circular provides clarification on the levy of GST on polybutylene feedstock and liquefied petroleum gas (LPG) supplied by oil refineries to manufacturers of Poly Iso Butylene and Propylene or Di-butyl para Cresol, where such raw materials are supplied through dedicated pipelines and only a portion is retained by the manufacturer.

It explains that in these transactions, oil refineries supply the principal raw materials on a continuous basis, out of which only the net quantity actually retained by the manufacturer is used in the manufacturing process, while the remaining quantity is returned to the refinery. A doubt had arisen as to whether GST is payable on the total quantity supplied or only on the quantity retained.

The clarification states that GST is payable by the refinery only on the net quantity of polybutylene feedstock and LPG retained by the manufacturer for the manufacture of Poly Iso Butylene and Propylene or Di-butyl para Cresol. The returned quantity is not liable to GST at that stage. However, if the returned quantity is subsequently supplied by the refinery to any other person, GST would be payable on such supply.

The circular further clarifies that this guidance is limited to the GST regime, and any issues relating to past periods will be governed by the law applicable at the relevant time.