ZLD treated water from wastewater treatment classified as demineralized water under Chapter 2201, taxable at 18%

The Gujarat AAR ruled that ZLD treated water obtained from wastewater treatment through ultra-filtration and reverse osmosis processes is classifiable under Chapter 2201 as demineralized water. The water, containing minuscule amounts of dissolved minerals and used for industrial manufacturing, is taxable at 18% under Sr. No. 24 of Schedule-III of notification No. 01/2017-CT(R). The AAR held that this treated water does not qualify for exemption under Sr. No. 99 of notification No. 02/2017-CT(R) despite being virtually free from toxic materials.

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Issues Involved:
1. Classification of ZLD treated water (RO) under GST.
2. Applicability of GST exemption on ZLD treated water (RO).
3. GST rate applicable to ZLD treated water (RO).

Detailed Analysis:

1. Classification of ZLD Treated Water (RO) under GST:

The applicant, M/s Gujarat Eco Textile Park Limited, operates a Common Effluent Treatment Plant (CETP) and a Zero Liquid Discharge Plant (ZLD Plant). The CETP processes hazardous wastewater from industries, making it suitable for disposal. The ZLD Plant further treats this water through ultra-filtration and reverse osmosis (UF/RO) to produce reusable water for industrial purposes. The applicant contends that the ZLD treated water (RO) is classifiable under Chapter Heading 2201.

2. Applicability of GST Exemption on ZLD Treated Water (RO):

The applicant sought clarification on whether ZLD treated water (RO) falls under the exemption provided by Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017, which exempts certain types of water from GST. The relevant entry exempts "Water [other than aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container]."

The Authority for Advance Ruling (AAR) examined the nature of ZLD treated water (RO) and its classification. The AAR noted that the treated water undergoes significant processes, including ultra-filtration and reverse osmosis, which remove impurities and minerals, rendering it similar to de-mineralized water. The AAR referred to various definitions of de-mineralized water, confirming that the ZLD treated water (RO) fits this category due to its low mineral content.

3. GST Rate Applicable to ZLD Treated Water (RO):

The AAR ruled that ZLD treated water (RO) does not qualify for GST exemption under Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017, as it is classified as de-mineralized water. Consequently, it falls under Sr. No. 24 of Schedule-III of Notification No. 01/2017-CT(R) dated 28-6-2017, 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 liters bottles)." This classification makes it subject to GST at the rate of 18% (9% CGST + 9% SGST).

Conclusion:
The AAR concluded that ZLD treated water (RO) is classifiable under Chapter Heading 2201 and is not eligible for GST exemption under Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017. Instead, it is taxable at 18% under Sr. No. 24 of Schedule-III of Notification No. 01/2017-CT(R) dated 28-6-2017.

Ruling:
1. ZLD treated water (RO) obtained from the ZLD plant (classifiable under Chapter 2201) is not eligible for exemption from payment of GST by virtue of Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017, as amended.
2. ZLD treated water (RO) obtained from the ZLD plant (classifiable under Chapter 2201) is taxable at 18% by virtue of Sr. No. 24 of Schedule-III of Notification No. 01/2017-CT(R), as amended.

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