Court rules purified water taxable under GST, even in non-sealed containers.

The court ruled that purified water, whether sold in sealed or non-sealed containers, is not exempt from GST. The exemption applies only to specific types of water not including purified water. Purified water remains classified under Chapter 2201 and is taxable at the applicable rate. Additionally, selling water in containers constitutes a composite supply, with the principal supply being water, and the containers being ancillary. The tax rate applicable to the principal supply (water) applies to the entire composite supply.

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Issues Involved:
1. Classification and HSN code for water sold in non-sealed containers.
2. Determination of whether selling water in containers constitutes a composite supply.

Issue-wise Detailed Analysis:

1. Classification and HSN Code for Water Sold in Non-sealed Containers:

The applicant sought clarity on the classification and HSN code for water sold in non-sealed containers. The relevant provisions under Notification No. 01/2017-Central Tax (Rate) and Notification No. 02/2017-Central Tax (Rate) were examined. The applicant argued that purified water sold in non-sealed containers should be exempt from GST based on the interpretation of the notifications and a press release from the 28th GST Council meeting, which stated that "water supplied for public purposes (other than in sealed containers) does not attract GST."

However, the judgment clarified that purified water, whether sold in sealed or non-sealed containers, is not exempt from GST. The exemption applies only to water that is not aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized, or sold in sealed containers. The ruling emphasized that the specific exclusion of purified water from the exemption list indicates that purified water, even when sold in non-sealed containers, is subject to GST. Thus, the classification and HSN code for purified water remain under Chapter 2201, and it is taxable at the applicable rate.

2. Composite Supply of Water and Containers:

The applicant also queried whether the sale of water in containers constitutes a composite supply. According to Section 2(30) of the CGST Act, 2017, a composite supply involves two or more taxable supplies of goods or services that are naturally bundled and supplied together in the ordinary course of business, with one being the principal supply. The ruling confirmed that selling water in containers meets the criteria for a composite supply, as the principal supply is the water, and the containers are ancillary to the supply of water. Consequently, the tax rate applicable to the principal supply (water) applies to the entire composite supply.

Ruling:

Question 1: The classification and HSN code of water sold in non-sealed containers is 2201. However, purified water, whether sold in sealed or non-sealed containers, does not fall under Sr. No. 99 of Notification No. 02/2017 and is subject to GST.

Question 2: The sale of water in containers constitutes a composite supply, and the tax rate applicable to the principal supply (water) applies to the entire composite supply.

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