2024 (1) TMI 1200 - AAR - GST

Classification of goods - treated water that would be sold by the Applicant, after carrying out various treatment process on the effluent water purchased by them - rate of GST applicable on the said treated water - HELD THAT - Upon going through the processes effected by the Applicant, the effluent water is subjected to micro-filtration and sand filtration process to remove suspended impurities. They have then used a scries of RO units for removing minerals. In spite of the RO treatment, the TDS of the treated water is higher, which can be seen from the test report. As per the report furnished by The South India Textile Research Association (SITRA) Textile Testing and Service Centre, test report No. V2300303, dated 9-8-2023 of Sample given for testing, in the case of the Applicant, it is seen that the recovered water contains chlorides, sulphates, Bicarbonates, etc. The TDS levels of the treated water as per the test report is 294 mg/1, which clearly shows the treated water is not demincralized as per the standard norms. From the above, it is clear that treated water cannot be construed as demineralized water. Water recovered out of the effluent treatment process nothing but an ordinary water which is suitable for reuse by the dyeing and bleaching units as a solvent and as a washing, rinsing medium. Thus, it aptly fits into Sl. No. 99 of Notification No. 2/2017-C.T. (Rate), dated 28-6-2017 under the Heading 2201 rather than Sl. No. 24 of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 under the same Heading 2201. The common effluent treatment plant has been set up in order to comply with the legislative and environment regulations thereby conserving water through recovery and reuse and not to manufacture water or chemicals - effluent treated water is eligible for exemption as per Notification No. 2/2017-Central Tax (Rate) as amended vide Notification No. 7/2022-Central Tax (Rate), dated the 13th July, 2022.

Summary

Issues Involved:
1. Classification of treated water sold by the applicant.
2. Applicable GST rate on the treated water sold by the applicant.

Summary:

Issue 1: Classification of Treated Water

The applicant, a common effluent treatment plant, processes effluent water from dyeing units and sells the treated water back to these units. The applicant sought clarification on the classification of this treated water under GST laws. The applicant argued that the treated water should be classified under Heading 2201 as "demineralized water," attracting an 18% GST rate as per Sl. No. 24 of Notification No. 1/2017-C.T. (Rate).

The ruling examined the nature of the treated water and found that it does not meet the criteria for "demineralized water" as its Total Dissolved Solids (TDS) level is 294 mg/L, which is higher than the standard for demineralized water. The treated water is not completely free of impurities and is suitable only for industrial reuse, not for human consumption.

Issue 2: Applicable GST Rate

The ruling referred to Circular No. 179/11/2022, which clarifies that treated sewage water attracts a Nil rate of GST under Sl. No. 99 of Notification No. 2/2017-C.T. (Rate). The ruling concluded that the treated water from the applicant's effluent treatment process falls under this category, as it is not demineralized or purified water with special characteristics.

Final Ruling:

1. The treated water is classified under Heading 2201 as "Water [other than aerated, mineral, distilled, medicinal, ionic, battery, demineralized and water sold in sealed container]" per Sl. No. 99 of Notification No. 2/2017-C.T. (Rate).
2. The treated water is eligible for a Nil rate of GST.