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TMI Blog2022 (2) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... underground storage tank of the applicant company as agreed in Schedule XVII of the BWPA therein. Invoices issued for sale of product water has been furnished. Thus in our opinion, this activity of treatment of water on own account and supply of water is sale simpliciter and therefore this notification which provides exemption to services do not have any application with regard to supply of water. Whether the applicant is eligible to avail exemption under Entry no.99 of Notification no.2/2017 dt. 28.06.2017 read with clarification in Circular No.52/26/2018-GST dt. 09.08.2018? - HELD THAT:- 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 - t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 ₹ 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, the applicant has submitted that Sl.no.99 of Notification no.2/2017 dated 28.06.2017 exempts HSN 2201- Water [other that aerated, mineral, purified, distilled, medicinal, ionic battery, de-mineralised and water sold in sealer container]. Further, the applicant has stated that the clarifications issued vide Circular No.52/26/2018-GST specifically addresses the issue on Supply of safe drinking water for public purpose. The applicant has also stated that they have sought the Chennai South Commissionerate to provide clarification on the Applicability of GST on supply of Desalinated Water . In response, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffective 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 demineralization; that water is treated/desalinated exclusively for the purpose of human consumption, whereas the demineralized water cannot be used for human consumption because of its hazardous effects on human health and it is used exclusively for scientific purposes. Therefore applicant approached jurisdictional commissionerate for clarification and they were intimated that GST was applicable on desalinated water. Hence they started billing the invoice with GST which was not intended to be paid by their recipient namely CMWSSB. Hence they have filed this application for ruling. 3.3 They have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 transferred to CMWSSB or vests with the applicant as on date. 4.2 The applicant vide their letter dated 16.12.2021 received on 20.12.2021 submitted the following: They have entered into an agreement with CMWSSB on 13.09.2005 to set up 100MLD Desalination Plant at Minjur, Chennai on DBOOT basis and a Copy of Master Agreement dated 05.01.2007 between CWDL, U.T.E Construction Desaladora Chennai and BEFESA Infrastructure India(P) Ltd has been attached. CWDL draws raw water from sea unconditionally without paying any amount towards royalty; that they pay a licence fee for using the coastal land on annual basis to the Tamilnadu Maritime Board, Chennai. Copy of Form 26A Licence for the Allotment of Coastal lands has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Whether GST is applicable on supply of safe drinking water for public purpose by Tvl. 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 Sl.No.99 of Notification 02/2017 for supply of water or/and 3. Sl.No. 3 of Notification 12/2017 for transaction of supply of safe drinking water for public purpose by Tvl. Chennai Water Desalination Plant Limited (CWDL) to Tvl. Chennai Metro Water Supply and Sewerage Board, a Government Authority The above questions being on the applicability of notification and on determination of liability to pay tax on the activities carried on by the applicant were found admissible under Section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to measure the volume of Product water dispatched to CMWSSB on a monthly basis. The cost for ownership, maintenance, calibration and replacement of the meters shall be borne by the applicant. 6. The invoice No. CWDL/CMWSB/INV/SEP-2021/ 135 dt. 05.10.2021 issued by the applicant to CMWSSB contains the charge both Water capacity and water variable. WVC has been calculated based on the quantity of product water supplied. 7. The State Support Agreement between the applicant, CMWSSB and the Governor of State of Tamilnadu through the Secretary, Municipal Administration and Water Supply Department of Government of Tamilnadu spells out the scope of the implementation of the subject DBOOT plant as supply of potable water to CMWSSB for domestic and non-domestic purpose. From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 applicant abstracts water from sea, treats the same in the facility owned, managed, operated, maintained by them and sells the 'treated water' to the Purchasers' and charge them for such supply. The applicant is not involved in the distribution of the water supply. to the common public and sale of water to CMWSSB is done at the 'Off-take points' at the underground storage tank of the applicant company as agreed in Schedule XVII of the BWPA therein. Invoices issued for sale of product water has been furnished. Thus in our opinion, this activity of treatment of water on own account and supply of water is sale simpliciter and therefore this notification which provides exemption to services do not have any appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess 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 Discharge Thus it is seen that the desalination is carried out by Reverse osmosis process. Reverse osmosis is a process where water from the ocean is forced through thousands of tightly-wrapped, semi permeable membranes under very high pressure. The membranes allow the smaller water molecules to pass through, leaving salt and other impurities behind. Thus in this process water molecules are separated from sea water. From the documents furnished it is observed that the desalinated water is supplied to CMWSSB for distribution as safe drinking water to domestic and non-domestic purposes. The process of desalination has also been differentiated from that of demineralization by CMWSSB vide its letter dt. 22.01.2018 addressed to the applicant wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 notification published vide TamilNadu GO Ms. No. 63 dated 29/6/2017. Since purified water is excluded from the exemption entry, the point of contention appears to be that since the raw water is treated to various processes to make it potable, whether these processes make the raw water as a 'purified water' or it remains as 'water treated' to make it fit as potable water. As discussed supra in para 7.3, not only the term used in the agreement for the supply denotes it is only 'potable water' which is supplied, but the treatment processes specified elsewhere in the agreement and the intent and the purpose of the whole arrangement is only ensuring sustainable supply of potable water. Potable water is never to be equated to 'purified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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