No GST on ghee units' own produced hydrogen gas

ISLAMABAD (October 07 2003): Giving a major relief to the ghee/cooking oil industry, the government has withdrawn general sales tax (GST) on the in-house production of hydrogen gas, says an order issued to Pakistan Vanaspati Manufacturers Association (PVMA) here on Monday.

However, the exemption would not be applicable on gas not manufactured within the premises or purchased/supplied by the manufacturers of vegetable ghee.

The tax authorities have used serial number 43 of the Sixth Schedule of Sales Tax Act, 1990, for extending GST exemption to the ghee/cooking oil industry.

Sources said that the PVMA had made a representation to exempt consumption of hydrogen gas produced within the manufacturing premises and used in-house for the manufacture of vegetable ghee from edible oil, from GST as the final product/vegetable ghee remains taxable.

The authorities have examined the issue in consultation with all the stakeholders. According to CBR, hydrogen gas is used to convert refined and bleached edible oil into vegetable ghee using nickel as catalyst.

Ghee manufacturing units have “gas cracking” plants to produce hydrogen gas from natural gas or through electrolysis of water.

In budget 2003-04, the CBR has amended serial number 43 of the Sixth Schedule of the Sales Tax Act, 1990, which reads as follows:

“Raw material and intermediate goods or services if used by the sales tax registered manufacturer himself in the manufacture of goods subject to sales tax.”

Keeping in view of this provision, it is clear that if a manufacturer of vegetable ghee is producing hydrogen gas within his premises for use in the manufacture of final product i.e. vegetable ghee, its consumption within the same premises is exempt from levy of sales tax.

The CBR added that the decision would be effective retrospectively and would not apply in cases subjudice.

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