2021 (9) TMI 950 - AAR - GST

'Treated Water' from Sewage Treatment Plant not GST exempt; taxable at 18% under Schedule III.

The authority ruled that the 'Treated Water' obtained from the Sewage Treatment Plant is not eligible for GST exemption under SI. No. 99 of Exemption ... Classification of goods under HSN 2201 - scope of exemption entry for 'water' (SI. No. 99 of Notification No. 02/2017) - exclusion of 'purified' water from exemption - coverage of 'waters' and taxable entry (SI. No. 24 of Schedule III of Notification No. 01/2017) - purposive interpretation and noscitur a sociis in construing tariff entries - applicability of GST rate on treated/purified water supplied for industrial useScope of exemption entry for 'water' (SI. No. 99 of Notification No. 02/2017) - exclusion of 'purified' water from exemption - classification of goods under HSN 2201 - Treated water obtained from the STP is not eligible for exemption under SI. No. 99 of Notification No. 02/2017. - HELD THAT: - The Authority examined the nature of the product supplied by the applicant and the text of Sr. No. 99. The entry grants exemption to 'water' but expressly excludes categories such as 'purified' water. The STP output is produced by processes (screening, grit removal, nutrient removal, aeration, MBR, RO, degassing, pH adjustment, disinfection) that remove contaminants and alter the properties of sewage to make it fit for industrial use. On the applicant's own submissions and the tested parameters, the output is purified/treated sewage water and not simple/natural water. The language of the exemption entry and the legislative scheme indicate that water which has been subjected to purification/treatment is outside the exemption. Therefore the impugned supply does not fall within Sr. No. 99 and cannot claim the NIL rate under that notification. [Paras 5]Treated water from the STP is not covered by the exemption at Sr. No. 99 and is not exempt from GST.Coverage of 'waters' and taxable entry (SI. No. 24 of Schedule III of Notification No. 01/2017) - applicability of GST rate on treated/purified water supplied for industrial use - classification of goods under HSN 2201 - Treated water obtained from the STP is taxable under Sr. No. 24 of Schedule III of Notification No. 01/2017 and attracts GST at the prescribed rate. - HELD THAT: - Having held that the product is purified/treated water, the Authority considered Sr. No. 24 which applies to 'Waters, including natural or artificial mineral waters and aerated waters...' and forms part of the taxable entries under HSN 2201. The statutory entries read together demonstrate that waters excluded from the exemption are brought within the taxable classification. The processes applied by the applicant transform sewage into purified water used for industrial purposes; it is not supplied as drinking water for public purposes nor in sealed containers as covered by other specific entries. Consequently, the treated/purified water falls within the chargeable entry and is taxable under the Schedule as provided. [Paras 5]Treated water from the STP is covered by Sr. No. 24 (HSN 2201) and is taxable at the rate specified therein.Final Conclusion: The Authority ruled that the sewage-derived treated water supplied by the applicant is purified/treated water not eligible for the exemption in Sr. No. 99 of Notification No. 02/2017, and accordingly is classifiable under HSN 2201 as covered by Sr. No. 24 of Schedule III of Notification No. 01/2017 and is taxable under the GST rates prescribed therein. Issues Involved:1. Eligibility of 'Treated Water' obtained from STP for GST exemption under SI. No. 99 of Exemption Notification No. 02/2017.2. Taxability of 'Treated Water' obtained from STP at 18% under SI. No. 24 of Schedule III of Notification No. 01/2017.Issue-Wise Analysis:1. Eligibility of 'Treated Water' for GST Exemption:The applicant, engaged in the manufacture and sale of fertilizers and industrial chemicals, operates a Sewage Treatment Plant (STP) converting sewage water into treated water for industrial use. The applicant sought clarity on whether this treated water is exempt from GST under SI. No. 99 of Exemption Notification No. 02/2017, which exempts 'Water (other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container).'The applicant argued that the treated water should be considered as 'water' under the exemption entry since it is not fit for drinking but suitable for industrial use. The applicant also highlighted that under the Maharashtra VAT Act, water was exempt from VAT, supporting their claim for GST exemption.However, the authority observed that the treated water undergoes significant purification processes, removing bio-waste, grit, undesirable chemicals, biological contaminants, suspended solids, and gases, making it 'purified water.' Since 'purified water' is explicitly excluded from the exemption under SI. No. 99, the authority concluded that the treated water does not qualify for GST exemption.2. Taxability of 'Treated Water' at 18% GST:The applicant also sought clarity on whether the treated water is taxable at 18% under SI. No. 24 of Schedule III of Notification No. 01/2017, which covers 'Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavoured (other than Drinking water packed in 20 litres bottles).'The authority noted that the treated water, being purified, falls under the category of 'waters' as mentioned in SI. No. 24. The entry includes various types of water, and the treated water, being purified and used for industrial purposes, fits within this classification. Therefore, the treated water is subject to GST at 18%.Conclusion:The authority ruled that the 'Treated Water' obtained from the STP is not eligible for GST exemption under SI. No. 99 of Exemption Notification No. 02/2017 because it is classified as 'purified water.' Instead, it is taxable at 18% under SI. No. 24 of Schedule III of Notification No. 01/2017.Order:1. 'Treated Water' obtained from STP is not eligible for exemption from GST under SI. No. 99 of Exemption Notification No. 02/2017.2. 'Treated Water' obtained from STP is taxable at 18% under SI. No. 24 of Schedule III of Notification No. 01/2017.