2023 (8) TMI 1555 - 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 - In the case of M/s. Kasipalayam Common Effluent Treatment Plant Private Limited 2021 (8) TMI 188 - AUTHORITY FOR ADVANCE RULING TAMILNADU it was pronounced that Water recovered out of effluent treatment process is partly de-mineralized in nature for industrial use and therefore is classifiable under Heading No. 2201 as Waters described under Sl. No. 24 of Annexure-III of Notification No.01/2017 Central Tax (Rate) dated 28-6-2017 taxable at the rate of 18 per cent GST. 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 - As per the report furnished by The South India Textile Research Association (SITRA) Textile Testing and Service Centre test report No. V2300306 dated 09.08.2023 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 616 mg/1 which clearly shows the treated water is not demineralized as per the standard norms. From the above it is clear that treated water cannot be construed as de-mineralized water. The treated water will not fit into sl.No.24 of Notification No.01/2017-CT(Rate) dated 28.06.2017. Also treated water is not demineralized water as claimed by them but water without any special characters as indicated in the tariff entries - 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. 02/2017 CT (Rate) dt.28.06.2017 under the heading 2201 rather than Sl.No.24 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 under the same heading 2201. The ultimate intention behind the effluent treatment process is to treat the effluent water discharged by textile units to recover water salt and other chemicals consumed during the course of dyeing and bleaching to the maximum extent possible so as to reuse the same without getting it discharged to pollute water bodies. Moreover ZLD has been mandated by the TNPCB for all the highly polluting industries including Textile Dyeing and Bleaching industries in order to prevent pollution of River water and ground water. Therefore it is evident that 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 - the 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 - The said treated water is eligible for exemption.

Summary

Issues Involved:

1. Appropriate classification of the treated water sold by the applicant.
2. Applicable GST rate on the treated water sold by the applicant.

Issue-wise Detailed Analysis:

1. Classification of Treated Water:

The applicant operates a common effluent treatment plant, processing effluents from dyeing units to produce treated water. The primary question is the classification of this treated water under the GST framework. The applicant argued that the treated water should be classified as "demineralized water," under HSN 2201, attracting an 18% GST rate according to Notification No. 01/2017-CT(Rate). However, the ruling clarified that the treated water does not fit the characteristics of "demineralized water" as defined under the Customs Tariff Act, which includes distilled or conductivity water and water of similar purity. The test reports indicated that the treated water had significant levels of chlorides, sulphates, and bicarbonates, with a TDS (Total Dissolved Solids) level of 616 mg/l, which is not consistent with the standard for demineralized water. Therefore, the treated water could not be classified as demineralized or purified water.

2. Applicable GST Rate:

The applicant sought clarity on the GST rate applicable to the treated water. The ruling referenced Notification No. 2/2017-Central Tax (Rate), which exempts certain categories of water from GST under Sl. No. 99, including water that is not aerated, mineral, distilled, medicinal, ionic, battery, demineralized, or sold in sealed containers. The ruling concluded that the treated water, not fitting the special categories mentioned in the exclusion clause, qualifies as ordinary water. The ruling emphasized that the treated water is suitable for reuse by dyeing units but does not possess the special characteristics of the excluded categories. Consequently, the treated water is classified under heading 2201 and is eligible for a Nil GST rate, as it falls within the exemption provided by the said notification.

Conclusion:

The ruling determined that the treated water produced by the applicant's effluent treatment process is classified as ordinary water under heading 2201, not as demineralized or purified water. As such, it qualifies for a Nil GST rate according to Notification No. 2/2017-Central Tax (Rate), as amended. This classification aligns with the legislative intent to exempt ordinary water from GST, distinguishing it from specialized water types used for specific industrial or commercial purposes.