2023 (8) TMI 1555 - AAR - GST

AAR rules treated water from effluent treatment processes exempt from GST under Notification 2/2017-Central Tax Rate

IN RE : TVL SIRUPOOLAVAPATTI COMMON EFLUENT WATER TREATMENT PLANT SERVICES

IN RE : TVL SIRUPOOLAVAPATTI COMMON EFLUENT WATER TREATMENT PLANT SERVICES - TMI Issues Involved:1. Appropriate classification of the treated water sold by the applicant.2. Applicable GST rate on the treated water sold by the applicant.Issue-wise Detailed Analysis:1. Classification of Treated Water:The applicant operates a common effluent treatment plant, processing effluents from dyeing units to produce treated water. The primary question is the classification of this treated water under the GST framework. The applicant argued that the treated water should be classified as 'demineralized water,' under HSN 2201, attracting an 18% GST rate according to Notification No. 01/2017-CT(Rate). However, the ruling clarified that the treated water does not fit the characteristics of 'demineralized water' as defined under the Customs Tariff Act, which includes distilled or conductivity water and water of similar purity. The test reports indicated that the treated water had significant levels of chlorides, sulphates, and bicarbonates, with a TDS (Total Dissolved Solids) level of 616 mg/l, which is not consistent with the standard for demineralized water. Therefore, the treated water could not be classified as demineralized or purified water.2. Applicable GST Rate:The applicant sought clarity on the GST rate applicable to the treated water. The ruling referenced Notification No. 2/2017-Central Tax (Rate), which exempts certain categories of water from GST under Sl. No. 99, including water that is not aerated, mineral, distilled, medicinal, ionic, battery, demineralized, or sold in sealed containers. The ruling concluded that the treated water, not fitting the special categories mentioned in the exclusion clause, qualifies as ordinary water. The ruling emphasized that the treated water is suitable for reuse by dyeing units but does not possess the special characteristics of the excluded categories. Consequently, the treated water is classified under heading 2201 and is eligible for a Nil GST rate, as it falls within the exemption provided by the said notification.Conclusion:The ruling determined that the treated water produced by the applicant's effluent treatment process is classified as ordinary water under heading 2201, not as demineralized or purified water. As such, it qualifies for a Nil GST rate according to Notification No. 2/2017-Central Tax (Rate), as amended. This classification aligns with the legislative intent to exempt ordinary water from GST, distinguishing it from specialized water types used for specific industrial or commercial purposes.