2022 (12) TMI 1449 - AAR - GST

Exemption from GST - Treated Water obtained from CETP - Sl. No. 99 of the Exemption Notification No. 02/2017-Integrated Tax (Rate), dated 28-06-2017 - taxable at 18 per cent by virtue of Sl. No. 24 of Schedule - III of Notification No. 01/2017-Integrated Tax (Rate), dated 28-6-2017 or not. HELD THAT - The intention of the legislature to exempt the water was very clear that any type of water which is usually consumed/drink by the public at large of this country should not be taxed. To meet such objective GST Council has provided exemption under the Entry No. 99 of Not. No. 2/2017-CT (Rate) to Water which is free from all types of impurities supplied in cities and villages across the country either through tap or tanker, water cooler and water tap installed at various places across the country. Whereas aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container is not eligible for exemption from payment of GST under the said entry. This clearly shows the intention of the legislature that any type of water which are being sold in terms of commercial purpose have been kept out of the purview of exemption as provided under entry No. 99 of the Notification. The treated water obtained from CETP do not cover under the category of 'purified water' then what type of treated water would be i.e. whether cover under the category of aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized water. It can be concluded that after undergoing out all the process treated water obtained from CETP have micro amount of dissolved minerals and chemical and virtually free from all types of toxic materials. This treated water is used in the various industries viz. Pharmaceuticals, chemicals and leather industries for their manufacturing related process. Looking to the presence of small amount of metal and water obtained after treatment from CETP is covered under 'de-mineralize water'. Hence, the treated water obtained from CETP is not eligible for exemption under Sr. No. 99 of Notification No. 12/2017-CT (Rate) dated 28-6-2017. The 'Treated Water' obtained from CETP (classifiable under Chapter 2201) is taxable at 18 per cent by virtue of Sl. No. 24 of Schedule - III of Notification No. 01/2017 - Integrated Tax (Rate), dated 28-6-2017 (as amended) as 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)'.

Issues Involved:
1. Eligibility of 'Treated Water' obtained from CETP for GST exemption under Sl. No. 99 of Notification No. 02/2017-Integrated Tax (Rate).
2. Taxability of 'Treated Water' obtained from CETP at 18% under Sl. No. 24 of Schedule - III of Notification No. 01/2017-Integrated Tax (Rate).

Detailed Analysis:

1. Eligibility of 'Treated Water' for GST Exemption:

The applicant, a company promoted by textile processing industries, set up a Common Effluent Treatment Plant (CETP) to treat and recycle wastewater. The treated water, used in industrial processes, is not fit for human consumption. The applicant argued that the treated water is not "purified water" and thus should be exempt from GST under Sl. No. 99 of Notification No. 02/2017-Integrated Tax (Rate), which exempts water other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed containers.

The applicant cited dictionary definitions of "purify" and referenced the Tamil Nadu AAAR order, which stated that purified water is pure H2O containing only hydrogen and oxygen. They argued that the treated water, still containing some impurities, does not qualify as purified water.

The applicant also pointed out that the government clarified its intention not to tax general-purpose water, as evidenced by CBIC Circular No. 52/26/2018, which exempts drinking water not supplied in sealed containers from GST. They further noted that the word "purified" was deleted from Sr. No. 99 of Notification No. 12/2017-CT (Rate) by Notification No. 7/2022-Central Tax (Rate).

2. Taxability of 'Treated Water' at 18%:

During the personal hearing, the applicant reiterated their submissions and provided details on the processes of Sewage Treatment Plants (STP) and Effluent Treatment Plants (ETP). They explained that ETPs remove various impurities from industrial wastewater, making it suitable for industrial use but not for drinking.

The authority examined the definitions of various types of water (aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized) and concluded that the treated water from CETP is de-mineralized water. The processes involved in CETP, such as the use of coagulants, bacteria, activated carbons, chlorine, ultraviolet rays, and reverse osmosis, result in water that is virtually free from minerals and toxic materials.

Based on this analysis, the authority determined that the treated water obtained from CETP is de-mineralized water and does not qualify for exemption under Sr. No. 99 of Notification No. 12/2017-CT (Rate). Instead, it falls under the category of waters described in Sl. No. 24 of Schedule - III of Notification No. 01/2017-Integrated Tax (Rate) and is taxable at 18%.

Ruling:

1. 'Treated Water' obtained from CETP (classifiable under Chapter 2201) is not eligible for exemption from payment of tax by virtue of Sl. No. 99 of the Exemption Notification No. 02/2017-CT (Rate) dated 28-6-2017 (as amended) and Sl. No. 99 of the Exemption Notification No. 02/2017-Integrated Tax (Rate), dated 28-6-2017 (as amended).

2. 'Treated Water' obtained from CETP (classifiable under Chapter 2201) is taxable at 18% by virtue of Sl. No. 24 of Schedule - III of Notification No. 01/2017-CT (Rate) (as amended) and Sl. No. 24 of Schedule - III of Notification No. 01/2017-Integrated Tax (Rate), dated 28-6-2017 (as amended).

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