Treated water from effluent treatment classified as ordinary water under Sl.No. 99, eligible for GST exemption

AAR TamilNadu ruled that treated water produced from effluent treatment processes is classified as ordinary water under Sl.No. 99 of Notification No. 02/2017-CT (Rate), making it eligible for GST exemption. The authority determined that despite micro-filtration, sand filtration, and RO treatment, the water with TDS levels of 444 mg/l cannot be considered demineralized water under Sl.No. 24 of Notification No. 01/2017-CT (Rate). The treated water serves as reusable solvent for dyeing and bleaching units, supporting environmental compliance rather than manufacturing water or chemicals.

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Issues Involved:
1. Classification of treated water sold by the applicant.
2. Applicable GST rate on the treated water.

Summary:

Issue 1: Classification of Treated Water
The applicant, a common effluent treatment plant, processes effluent water from dyeing units to produce treated water. The applicant sought to classify this treated water under HSN 2201, arguing it is demineralized water. However, the Authority examined the processes and found that the treated water contains chlorides, sulphates, bicarbonates, and has a TDS level of 444 mg/l, which does not meet the standard for demineralized water. The Authority concluded that the treated water does not fit into the categories covered under HSN 2201 as demineralized water.

Issue 2: Applicable GST Rate
The applicant argued that treated water should attract 18% GST under S. No. 24 of Schedule III of Notification No. 01/2017-CT(Rate). However, the Authority found that the treated water, being ordinary water, is eligible for exemption under SI. No. 99 of Notification No. 02/2017-CT(Rate), which exempts water other than aerated, mineral, distilled, medicinal, ionic, battery, demineralized, and water sold in sealed containers. The Authority also referred to Circular No. 179/11/2022, which clarifies that treated sewage water attracts a Nil rate of GST, and applied the same analogy to the treated water in question.

Ruling:
1. The treated water is classified under SI. No. 99 of Notification No. 02/2017-CT(Rate) as "Water [other than aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container]".
2. The treated water is eligible for exemption from GST as per the cited notification.

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