GST on treated water

[Kaustubh Karandikar]

XYZ will be processing MIDC Water through Reverse Osmosis process to remove dissolved salts. The said processed water will be sold to various factories for industrial use. Is XYZ liable to pay GST on this processed water? If yes what is the HSN code and percentage of GST?

[KASTURI SETHI]

Dear Sir,

Treatment of water or processing of water does not amount to manufacture as no new different/new product is emerged. In pre-GST era it was classified under BAS. Now it may be under Business Support service attracting 18% rate of tax. Pl go through the following case law:-

2013 (30) S.T.R. 506 (Tri. - Del.) = 2014 (8) TMI 620 - CESTAT NEW DELHIUTILITY POWERTECH LTD. Versus COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD

[Alkesh Jani]

Dear Sir,

Para 6.2 and 6.3 of Circular No. 52/2018 dated 09.08.2018, is reproduced below for ready reference

6.2 Attention is drawn to the entry at S. No. 99 of notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, by virtue of which water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] falling under HS code 2201 attracts NIL rate of GST.

6.3 Accordingly, supply of water, other than those excluded from S. No. 99 of notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, would attract GST at “NIL” rate. Therefore, it is clarified that supply of drinking water for public purposes, if it is not supplied in a sealed container, is exempt from GST.

I hope this may be of help in the present discussion.

Thanks,

With Regards,

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

You are right on your view point but here is a question of service. Processing water or treating water does not amount to manufacture as CESTAT judgement mentioned above. Processing or treating water is service as mentioned at serial no.3(iii) (c) in notification no.11/17-CT(Rate) dated 28.6.17 as amended from time to time. It is part of composite supply made to Govt. attracting GST@ 12%.

AI Summary

GST on processed water may be taxable as a service or nil-rated when classified as exempt water supply. Tax liability for reverse-osmosis processed water depends on classification: processing may be treated as a service (not manufacture) and taxed as Business Support service or under service notifications, while supplies of ordinary water not falling within specified exclusions are nil-rated; the applicable GST rate therefore depends on whether the supply is characterised as exempt/nil-rated water or as a taxable service within relevant rate notifications.