2023 (1) TMI 231 - AAR - GST

Treated water from textile effluent plant taxable at 18% GST, not exempt like drinking water supply

AAR Gujarat ruled that treated water from Common Effluent Treatment Plant (CETP) is not exempt from GST under exemption notification for general water ... Exemption from GST - Treated Water obtained from CETP (classifiable under Chapter 2201) - exemption from GST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017- Integrated Tax (Rate), dated 28-6-2017 (as amended) as Water (other than aerated, mineral, purified, distilled, medical, ionic, battery, demineralized and water sold in sealed container) or taxable at 18 per cent by virtue of SI. No. 24 of Schedule - III of Notification No. 01/2017- Integrated Tax (Rate), dated 28-6-2017 (as amended) as 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 liters bottles)? - HELD THAT:- The applicant is a company promoted by cluster of textile processing industries for setting up of Common Effluent Treatment Plant to treat and recycled the effluent for Conveyance, Treatment & Disposal of waste water generated from the industries. The applicant received the effluent from such textile units for treatment and supply treated water obtained from ETP to the industries which required for their various processes - the effluent received from industries is passed through various processed in CETP and after carrying out due process treated water obtained from CETP which is suitable for Industrial use as per their requirements. The intention of the legislature to exempt the water was very clear that any type of water which is usually consumed/drink by the public at large of this country should not be taxed. To meet such objective GST Council has provided exemption under the Entry No.99 of Not. No. 2/2017-CT (Rate) to Water which is free from all types of impurities supplied in cities and villages across the country either through tap or tanker, water cooler and water tap installed at various places across the country. Whereas aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container is not eligible for exemption from payment of GST under the said entry. This clearly shows the intention of the legislature that any type of water which are being sold in terms of commercial purpose have been kept out of the purview of exemption as provided under entry No. 99 of the Notification. It can be concluded that after undergoing out all the process treated water obtained from CETP have micro amount of dissolved minerals and chemical and virtually free from all types of toxic materials. This treated water is used in the various industries viz. Pharmaceuticals, chemicals and leather industries for their manufacturing related process. Looking to the presence of small amount of metal and water obtained after treatment from CETP is covered under 'de-mineralize water'. Hence, we are of the view that the treated water obtained from CETP is not eligible for exemption under Sr. No. 99 of Notification No. 12/2017-CT (Rate) dated 28-6-2017. Thus, the Treated Water obtained from CETP (classifiable under Chapter 2201) is taxable at 18 per cent by virtue of SI. No. 24 of Schedule - III of Notification No. 01/2017- Integrated Tax (Rate), dated 28-6-2017 (as amended) as '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 liters bottles)'. Issues Involved:1. Eligibility of 'Treated Water' obtained from CETP for GST exemption under SI. No. 99 of Notification No. 02/2017-Integrated Tax (Rate).2. Taxability of 'Treated Water' obtained from CETP at 18% GST under SI. No. 24 of Schedule-III of Notification No. 01/2017-Integrated Tax (Rate).Detailed Analysis:1. Eligibility of 'Treated Water' obtained from CETP for GST exemption under SI. No. 99 of Notification No. 02/2017-Integrated Tax (Rate):The applicant, a company promoted by textile processing industries, operates a Common Effluent Treatment Plant (CETP) to treat and recycle wastewater for industrial use. The applicant argued that the treated water should be exempt from GST under SI. No. 99 of Notification No. 02/2017-Integrated Tax (Rate), which exempts water other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed containers.The applicant contended that the term 'purified' is not defined under the CGST Act, 2017, and referred to dictionary definitions which imply that purified water is free from foreign, extraneous, or objectionable elements. The applicant claimed that the treated water, although free from impurities, is not purified to the extent of being fit for human consumption and thus should not be classified as 'purified water.'The applicant supported their argument by referencing the Tamil Nadu AAAR order in the case of M/s New Tripura Area Development Corporation Limited, which held that purified water in chemical terms is pure H2O, containing only hydrogen and oxygen with no minerals.The applicant further argued that the treated water does not have specific characteristics and usages like other excluded waters (aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed containers) and can be readily replaced by municipal water. They also highlighted that the government's intention was not to tax water for general purposes, as evidenced by past indirect tax regimes and CBIC Circular No. 52/26/2018, which exempted drinking water not supplied in sealed containers from GST.However, the authority observed that the term 'purified' was deleted from the exemption list in Notification No. 7/2022-Central Tax (Rate) dated 13.07.2022, implying that the treated water might still fall under other categories of non-exempt water.2. Taxability of 'Treated Water' obtained from CETP at 18% GST under SI. No. 24 of Schedule-III of Notification No. 01/2017-Integrated Tax (Rate):The authority examined the processes involved in treating water at CETP, which includes screening out solid waste, using coagulants, bacteria, activated carbons, chlorine, and ultraviolet rays, and employing reverse osmosis to purify the water at a molecular level. The treated water, therefore, contains minimal dissolved minerals and is virtually free from toxic materials, making it suitable for industrial use.The authority concluded that the treated water obtained from CETP is de-mineralized water, which falls under the category of non-exempt water types listed in SI. No. 99 of Notification No. 02/2017-CT (Rate). Consequently, the treated water is not eligible for GST exemption.The authority referenced a similar ruling by the Tamil Nadu Authority for Advance Ruling in the case of M/s Kasipalayam Common Effluent Treatment Plant (P.) Ltd., which classified de-mineralized water for industrial use under Heading No. 2201 and taxable at 18% GST.Ruling:1. 'Treated Water' obtained from CETP (classifiable under Chapter 2201) is not eligible for exemption from payment of tax by virtue of SI. No. 99 of the Exemption Notification No. 02/2017-CT (Rate) dated 28-6-2017 (as amended) and SI. No. 99 of the Exemption Notification No. 02/2017-Integrated Tax (Rate), dated 28-6-2017 (as amended).2. 'Treated Water' obtained from CETP (classifiable under Chapter 2201) is taxable at 18% by virtue of SI. No. 24 of Schedule-III of Notification No. 01/2017-CT (Rate) (as amended) and SI. No. 24 of Schedule-III of Notification No. 01/2017-Integrated Tax (Rate), dated 28-6-2017 (as amended).