GST Clarification on Superior Kerosene Oil Used for LAB Production – Circular No. 12/12/2017-GST
<h3><strong>Key Highlights from CBIC Circular No. 12/12/2017-GST</strong></h3><p>On <strong>October 26, 2017</strong>, the <strong>Central Board of Indirect Taxes and Customs (CBIC)</strong> issued <strong>Circular No. 12/12/2017-GST</strong>, clarifying <strong>GST applicability on Superior Kerosene Oil (SKO) used in the production of Linear Alkyl Benzene (LAB)</strong>. The clarification removes ambiguity regarding tax liability on retained and returned SKO in such transactions.</p><h3><strong>1. The SKO-LAB Transaction Explained</strong></h3><ul><li><strong>LAB manufacturers receive SKO</strong> from refineries like <strong>Indian Oil Corporation (IOC)</strong>.</li><li>They <strong>extract n-Paraffin (C9-C13 hydrocarbons)</strong> from SKO, which is used in <strong>LAB production</strong>.</li><li>After extraction, <strong>83%-85% of SKO is returned</strong> to the refinery, while <strong>15%-17% is retained</strong>.</li><li>LAB manufacturers <strong>pay for the retained SKO only</strong>.</li></ul><h3><strong>2. GST Applicability on Retained SKO</strong></h3><ul><li>As per the <strong>22nd GST Council Meeting (October 6, 2017)</strong>, GST will be payable <strong>only on the net quantity of SKO retained</strong> for LAB manufacturing.</li><li>This ensures that LAB manufacturers are <strong>not burdened with GST on the entire SKO supply</strong>.</li></ul><h3><strong>3. GST on Returned SKO</strong></h3><ul><li>When the <strong>returned SKO is supplied to another person</strong>, the <strong>refinery must charge GST</strong>.</li><li>However, <strong>no GST applies when SKO is simply returned to the original refinery</strong>.</li></ul><h3><strong>4. Past Transactions & Legal Compliance</strong></h3><ul><li>The clarification applies <strong>only under GST law</strong>, and any past transactions will be <strong>handled as per previous tax laws</strong>.</li></ul><h3> </h3><p><a href="https://cms.plasament.com/storage/chirag-singla/circularno-12-gst.pdf">circularno-12-gst</a><br> </p>