2024 (6) TMI 107 - AAR - GST

Classification of goods - ZLD treated water (RO) obtained from ZLD plant - classifiable under chapter heading 2201 or not - applicability of GST exemption under Sr. No. 24 of Schedule-Ill of notification No. 01/2017-Central Tax (Rate), dated 28-6-2017 as amended or under Sr. No. 99 of notification No. 02/2017-Central Tax (Rate), date 28-6-2017 as amended. HELD THAT - The applicant has established a CETP for collection, treatment disposal of wastewater (effluent) generated from the industries. The CETP treated effluent goes through ultra-filtration process and reverse osmosis process in the ZLD plant. The applicant has stated that the effluent received from industries after having undergone process in CETP and the process of ultrafiltration and reverse osmosis in ZLD plant, is then suitable for Industrial use. The water obtained from CETP, which has further undergone the process of ultra-filtration and reverse osmosis in the ZLD plant, has micro amount of dissolved minerals and chemicals and is virtually free from ail types of toxic materials. This treated water is used in various industries for their manufacturing related process. Further, looking to the presence of miniscule amount of minerals in the water so obtained after treatment from ZLD, we find that it is covered under 'demineralized water'. Hence, the treated water obtained from ZLD is not eligible for exemption under Sr. No. 99 of notification No. 2/2017-CT(R) dated 28.6.2017. The 'treated water' obtained after undergoing the process through CETP thereafter through ZLD plant, is classifiable under Chapter 2201, and is taxable @ 18% by virtue of Sr. No. 24 of Schedule-III of notification No. 01/2017-CT(R) 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 litters bottles'.

Issues Involved:
1. Classification of ZLD treated water (RO) under GST.
2. Applicability of GST exemption on ZLD treated water (RO).
3. GST rate applicable to ZLD treated water (RO).

Detailed Analysis:

1. Classification of ZLD Treated Water (RO) under GST:

The applicant, M/s Gujarat Eco Textile Park Limited, operates a Common Effluent Treatment Plant (CETP) and a Zero Liquid Discharge Plant (ZLD Plant). The CETP processes hazardous wastewater from industries, making it suitable for disposal. The ZLD Plant further treats this water through ultra-filtration and reverse osmosis (UF/RO) to produce reusable water for industrial purposes. The applicant contends that the ZLD treated water (RO) is classifiable under Chapter Heading 2201.

2. Applicability of GST Exemption on ZLD Treated Water (RO):

The applicant sought clarification on whether ZLD treated water (RO) falls under the exemption provided by Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017, which exempts certain types of water from GST. The relevant entry exempts "Water [other than aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container]."

The Authority for Advance Ruling (AAR) examined the nature of ZLD treated water (RO) and its classification. The AAR noted that the treated water undergoes significant processes, including ultra-filtration and reverse osmosis, which remove impurities and minerals, rendering it similar to de-mineralized water. The AAR referred to various definitions of de-mineralized water, confirming that the ZLD treated water (RO) fits this category due to its low mineral content.

3. GST Rate Applicable to ZLD Treated Water (RO):

The AAR ruled that ZLD treated water (RO) does not qualify for GST exemption under Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017, as it is classified as de-mineralized water. Consequently, it falls under Sr. No. 24 of Schedule-III of Notification No. 01/2017-CT(R) dated 28-6-2017, which covers "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)." This classification makes it subject to GST at the rate of 18% (9% CGST + 9% SGST).

Conclusion:
The AAR concluded that ZLD treated water (RO) is classifiable under Chapter Heading 2201 and is not eligible for GST exemption under Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017. Instead, it is taxable at 18% under Sr. No. 24 of Schedule-III of Notification No. 01/2017-CT(R) dated 28-6-2017.

Ruling:
1. ZLD treated water (RO) obtained from the ZLD plant (classifiable under Chapter 2201) is not eligible for exemption from payment of GST by virtue of Sr. No. 99 of Notification No. 02/2017-CT(R) dated 28-6-2017, as amended.
2. ZLD treated water (RO) obtained from the ZLD plant (classifiable under Chapter 2201) is taxable at 18% by virtue of Sr. No. 24 of Schedule-III of Notification No. 01/2017-CT(R), as amended.

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