Taxability of Charitable Organization's Drinking Water Supply: Not GST-exempt, Taxable at 18%

The case involved the taxability of supplying drinking water in an unpacked manner by a charitable organization. The authority ruled that the supply is not exempt from GST and is taxable at 18% as per the relevant notification. The distribution service was considered part of a composite supply, with the tax rate determined by the principal supply of purified water.

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Issues Involved:
1. Taxability of supply of drinking water in unpacked/unsealed manner by a charitable organization.
2. Applicability of GST exemption under SI.No. 99 of Notification 02/2017 - Central Tax (Rate) dated 28.06.2017.
3. Classification of services provided through mobile tankers.
4. Determination of composite supply and applicable tax rate.

Detailed Analysis:

Issue 1: Taxability of Supply of Drinking Water in Unpacked/Unsealed Manner by a Charitable Organization
The applicant, a charitable organization, proposes to supply purified drinking water in unpacked/unsealed manner through dispensers/mobile tankers at a concessional rate. The water is purified using the Reverse Osmosis (RO) process and supplied to the general public at Rs. 7 for 20 liters to cover operational costs.

Issue 2: Applicability of GST Exemption under SI.No. 99 of Notification 02/2017 - Central Tax (Rate) dated 28.06.2017
The applicant contends that their supply qualifies for GST exemption under SI.No. 99, which exempts intra-state supplies of water except for specific categories, including purified water. The applicant references Circular No. 52/26/2018-GST, which clarifies that unpacked/unsealed drinking water for public purposes is exempt from GST.

Authority's Findings:
The authority examined the exclusion clause in SI.No. 99, which explicitly excludes "purified water" from the exemption. Since the applicant's water is purified through the RO process, it falls under the exclusion and is liable for tax. The authority also clarified that the CBIC Circular does not override the exclusion clause in the notification.

Issue 3: Classification of Services Provided Through Mobile Tankers
The authority considered whether the service of distributing water through mobile tankers constitutes a separate supply or part of a composite supply. The principal supply is the purified water, and the distribution service is ancillary.

Issue 4: Determination of Composite Supply and Applicable Tax Rate
As per Section 2(30) of the GST Act, a composite supply consists of two or more taxable supplies naturally bundled together, with one being the principal supply. In this case, the principal supply is purified water, and the distribution service is ancillary. Therefore, the entire supply is treated as a composite supply, and the tax rate applicable to the principal supply (purified water) prevails.

Ruling:
The supply of drinking water in unpacked/unsealed manner through dispensers/mobile tankers by the charitable organization is not covered under the GST exemption as per SI.No. 99 of Notification 02/2017 - Central Tax (Rate) dated 28.06.2017. The supply is taxable at 18% as per Notification No. 1/2017-Central Tax (Rate), dated 28th June 2017, as amended.

Conclusion:
The authority concluded that the supply of purified drinking water by the applicant is taxable at 18% and does not qualify for the GST exemption under the specified notification. The distribution service is part of a composite supply, with the tax rate determined by the principal supply of purified water.

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