Activity of re-gasification of LNG owned customers, amounts to rendering of service by job work

The Gujarat Authority for Advance Ruling (AAR) has determined that the re-gasification of Liquefied Natural Gas (LNG) owned by customers constitutes a service provided through job work. This activity is therefore subject to a Goods and Services Tax (GST) rate of 12%. The ruling clarifies that the process of converting LNG into Regasified Liquefied Natural Gas (RLNG) for others falls under the definition of job work services.

The AAR, Gujarat in the matter of M/s. Petronet LNG Ltd. [Advance Ruling No. GUJ/GAAR/R/40/2021 dated August 11, 2021] held that, assessee's activity of re-gasification of LNG owned by its customers, amounts to rendering of service by Job Work and leviable to GST @12%.

Facts

M/s. Petronet LNG Ltd. ("the Applicant") provides regasification services to its customers on the Liquefied Natural Gas ("LNG") owned by the customers, referred as 'Tolling'. In the 'Tolling Model', the Applicant receives the LNG belonging to the customers at their plant, stores it, re-gasifies it and supplies Regasified Liquefied Natural Gas ("RLNG") to the customers. The Applicant enters into Re-gasification Agreements (RAs) with the customers, that includes reception of LNG ships at the unloading port, receipt by ship at the custody transfer point, storage and re-gasification of LNG, transportation and delivery of RLNG to the customer at the custody transport point through pipelines which are connected through Applicant's plant.

Issue

Whether the Applicant's activity of providing service of regasification of LNG owned by its customers to convert to RLNG, from its plant would amount to rendering of service by way of Job Work under the Central Goods and Services Tax Act, 2017 ("CGST Act")?

Held

The AAR, Gujarat in Advance Ruling No. GUJ/GAAR/R/40/2021 dated August 11, 2021 held as under:

• Observed that, the activity of conversion of LNG into RLNG is a process undertaken by Applicant on LNG belonging to another registered persons, are goods classified at HSN 2711 and the activity merits to be covered at entry 'id' of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated June 28, 2017 ("Services Rate Notification").
• Noted that, the government has issued the Circular 126/45/2019-GST dated November 22, 2019, mentioned at para 5 has clarified the issue crystal clear.
• Held that, the activity of re-gasification of LNG owned by Applicant's customers amounts to rendering of service by way of Job Work is liable to GST at 12%.