TaxTMI 
TaxTMI 
2022 (2) TMI 1104
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....licant) are registered under GST with GSTIN 33AACCC6640F1Z1. The applicant has sought Advance Ruling on the following questions: 1. Whether GST is applicable on supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metropolitan Water Supply and Sewerage Board(CMWSSB) a Government Authority; 2. Ruling is sought for applicability of SI.No.99 of Notification 02/2017 for supply of water or/and 3. SI.No. 3 of Notification 12/2017 for transaction of supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metro Water Supply and Sewerage Board, a Government Authority The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are processing sea water in to potable water through desalination and they supply to Chennai Metropolitan Water Supply and Sewerage Board for distribution to General Public. 2.2 On interpretation of law, ....
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.... them; that they undertake only the de-salination process. They were asked to furnish the copy of the agreement entered into with CMWSSB for such de-salination and supply; invoices raised on CMWSSB for such supply; and a write upon the entire process undertaken by them. 3.2 The applicant vide their letter dated 01.11.2021 (received on 12.11.2021) submitted that they supply desalinated water in bulk form to M/s. CMWSSB under Bulk Water purchase agreement and such water supplied in bulk form is exempted in earlier law by virtue of Notification no,12/2012-CE dt. 17.03.2012. With the introduction of GST, effective from 01.07.2017, they approached CMWSSB for the applicability of GST on supply of desalinated water, wherein CMWSSB responded to the applicant vide their letter ref: CIVIWSSB/Fin (Cont & supp)/2017-18/Spl dt. 22.01,2018, stating that as per SI.No.99 of Notification no.2/2017CT-(R) dt.28.06.2017, water falling under Tariff item 2201 is exempt from GST; that the entry is an exclusion based entry and the items not mentioned therein are exempt; that desalination process has not been included in the entry and hence is exempted; that the process of desalination is different from....
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....) Intermediate pumping and pressure sand filters (d) Cartridge Filtration iii. Desalination-Reverse osmosis process iv. Post treatment in product water tank - v. Brine discharge • The sea water after undergoing the above mentioned processes, would become 'desalinated water' or any other nomenclature that can be assigned to sea water which has undergone such processes as listed above. Hence, as per the notification 02/2017 CT(Rate) water is exempted from levy of GST. 4.1 On perusal of the submissions made by the applicant the following details were called for vide notice issued on 02.12.2021. • From the conditions of the Bulk Water Purchase Agreement (BWPA), it was observed that the applicant abstracts sea water from the abstraction area on their own accord. Therefore, reasons for claiming the applicability of Sl.No.3 of Notification 12/2017 along with documentary evidences regarding the approval for drawl of water from the appropriate authority and such others were required to be furnished. • Clarifications regarding whether the ownership of the plant constructed under the DBOOT has been transferr....
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.... by them as well as the comments of the State and Central Tax officers. The issues raised before us is regarding the taxability of GST on the desalinated water supplied by the applicant to M/s. CMWSSB, a government authority for distribution of water to general public and applicability of notification 02/2017 and/ or Notification no.12/2017 cited supra. Applicant is a Special Purpose vehicle (SPV) promoted and incorporated by a consortium consisting of M/s.IVRCL Infrastructures &Projects Ltd, Befesa Agua, Spain. They have been awarded with detailed design, engineering, financing, procurement, construction, operation, maintenance and transfer of the seawater desalination plant on 25 years DBOOT basis, the client being M/s.CMWSSB. The applicant and CMWSSB have entered into a Bulk Water Purchase Agreement (BWPA) for the implementation of the project, located at Minjur, Chennai with Reverse osmosis process. The SPV supplies 'desalinated water' to CMWSSB in bulk form for which a consideration in the form of yearly water capacity charges and water variable charges per Kilo litre of water supplied is paid. They have sought Advance Ruling on the following questions: 1. Whe....
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....to purchase bulk water shall have a term of ,from the effective date until the 25th anniversary of the COD (Agreement Period) when it shall automatically terminate and the facility shall get transferred to CMWSSB, 4. Section 8.2 of the BWPA, stipulates that the applicant company undertakes to sell Desalinated water to CMWSSB on payment of aggregate of water capacity charges(WCC) and water variable charges (WVC) including energy charges to the applicant by CMWSSB. WCC is the amount of money determined, levied, demanded, charged collected, retained and appropriated by the applicant from CMWSSB for setting up and making available at all tinies the facility to CMWSSB, which would go towards covering all fixed costs which will not have any escalation. WVC shall be payable by CMWSSB on the basis of water units supplied which will be the product of water units supplied and the rate of per unit charged. Invoices are raised monthly for such charges by the applicant which shall be paid by CMWSSB within 30 days of the date of invoice. 5. Section 9.1 of the BWPA stipulates that the applicant shall procure state of the art meter and install them at Product Water Dispatch point....
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.... Notification no.12/2017 is first taken up for consideration. The entry Sl.No. 3 of the said notification is as under: 3 Chapter 99 Pure services (excluding works contract service or other composite supplies involving supply of any aoods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Nil Nil The above entry exempts pure services provided to a local authority in relation to functions entrusted to a Panchayat/Municipality under Article 243 G/ 243W of the Constitution. 7.3 The eligibility to 'Supply of Water' under this Notification is examined first. Providing 'Water Supply for Domestic, Industrial and Commercial Purpose' is listed as Item 5 of 12th Schedule (Article 243W) of the Constitution. The applicant claims exemption under this entry for the activity of sale of water to the purchaser namely CMWSSB. It is evident that the entry exempts only services. The appli....
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....efore, it is clarified that supply of drinking water for public purposes, if it is not supplied in a sealed container, is exempt from GST." 8.2 The clarification in para 6 of circular no 52/26/2018-GST, dated 09.08.2018 issued from F.No. 354/255/2018 TRU states that supply of drinking water for public purpose when not sold in sealed container is exempted. The notification is unambiguous in as much as it clearly states the type of waters which is not exempted. On a joint reading of the Notification and the Clarification, the waters mentioned at sl.no. 1 to 8 and drinking water for public purpose sold in sealed container are not exempted. In the case at hand the applicant sells the water to CMWSSB after the process of desalination which is as under:- i. Drawing of water from the sea and intake pump house to pump pre-treatment process ii. Pre-treatment (a) Flocculation & clarifier settling (b) 1^st stage dual media gravity filters (c) Intermediate pumping and pressure sand filters (d) Cartridge Filtration iii. Desalination-Reverse osmosis process iv. Post treatment in product water tank v. Brine Discha....
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.... desalinated water eligible to be classified under HSN-2201 attracting NIL rate of GST. 9.1 The centre jurisdictional authority has stated that the applicant is supplying to CMWSSB and not to consumers directly and hence are not eligible to avail concession under Entry 99. Also it has been stated that the activities carried out by the applicant cannot be termed as 'Pure services' as laid down in Order-in-Appeal no.178G18/2021 dt.30.06.2021 passed by the TN State Authority for Advance Ruling in the case of M/s. New Tiruppur Area Development Corporation Ltd. However in the order cited, it has been held that the raw water abstracted from river cauvery is purified and supplied as potable water which is eligible to be classified under Entry no.99 cited supra attracting NIL rate of GST. The relevant portion of the order is as extracted below: "7.5 There is no dispute regarding the classification of water as such under 2201. However, the main question raised by the appellant and also the point of reference made by the members of AAR is whether the water supplied by the appellant is exempted under sl. No. 99 of notfn. No.02/2017-CT(R) and its equivalent SGST notificatio....