Treated effluent water with TDS 294 mg/l classified as ordinary water under HSN 2201, qualifies for GST exemption

AAR Tamil Nadu ruled that treated water produced from effluent water processing is classified as ordinary water under HSN 2201, not demineralized water. Despite micro-filtration, sand filtration, and RO treatment, the water retained TDS levels of 294 mg/l with chlorides, sulphates, and bicarbonates, failing to meet demineralized water standards. The treated water, suitable for reuse in dyeing and bleaching operations, qualifies for GST exemption under Notification No. 2/2017-CT (Rate) rather than standard GST rates under Notification No. 1/2017-Central Tax (Rate).

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

Summary:

Issue 1: Classification of Treated Water

The applicant, a common effluent treatment plant, processes effluent water from dyeing units and sells the treated water back to these units. The applicant sought clarification on the classification of this treated water under GST laws. The applicant argued that the treated water should be classified under Heading 2201 as "demineralized water," attracting an 18% GST rate as per Sl. No. 24 of Notification No. 1/2017-C.T. (Rate).

The ruling examined the nature of the treated water and found that it does not meet the criteria for "demineralized water" as its Total Dissolved Solids (TDS) level is 294 mg/L, which is higher than the standard for demineralized water. The treated water is not completely free of impurities and is suitable only for industrial reuse, not for human consumption.

Issue 2: Applicable GST Rate

The ruling referred to Circular No. 179/11/2022, which clarifies that treated sewage water attracts a Nil rate of GST under Sl. No. 99 of Notification No. 2/2017-C.T. (Rate). The ruling concluded that the treated water from the applicant's effluent treatment process falls under this category, as it is not demineralized or purified water with special characteristics.

Final Ruling:

1. The treated water is classified under Heading 2201 as "Water [other than aerated, mineral, distilled, medicinal, ionic, battery, demineralized and water sold in sealed container]" per Sl. No. 99 of Notification No. 2/2017-C.T. (Rate).
2. The treated water is eligible for a Nil rate of GST.

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