The Authority for Advance Rulings (AAR),Gujarat in the case of Gujarat Eco Textile Park Ltd. vide ADVANCE RULING NO. GUJ/GAAR/R/2024/11 dated 30.05.2024, has held that the treated water obtained after processing through the Common Effluent Treatment Plant (CETP) and Zero Liquid Discharge (ZLD) plant is classified under Chapter 2201 and is subject to an 18% GST rate according to entry no. 24 of Schedule-III of Notification No. 01/2017-CT(R). It does not qualify for the exemption under entry no. 99 of Notification No. 02/2017-CT(R) due to its de-mineralized nature.
Facts of the Case:- The Applicant operates a CETP and a ZLD plant, for the collection, treatment, and disposal of waste water (effluent) generated by industries. The CETP treats effluent which then undergoes ultra-filtration and reverse osmosis in the ZLD plant to produce treated water suitable for industrial use.
Issue:- The applicant sought clarification on whether the treated water falls under:
- Entry no. 24 of Schedule-III of Notification No. 01/2017-CT(R)
- Entry no. 99 of Notification No. 02/2017-CT(R)
Rulings:- The Authority noted that water specifically is eligible for exemption from payment of GST, while other types of water, i.e., aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed containers, are not covered under entry no. 99 and are liable to payment of applicable GST.
Further, noted that the intention of the legislature to exempt water was that any type of water that is usually consumed or drunk by the public at large is not to be taxed. To meet such an objective, the GST Council has provided exemption under entry No. 99 of notification No. 2/2017-CT(R) to water that is free from all types of impurities and is supplied in cities and villages across the country either through a tap or tanker, a water cooler, or a water tap installed at various places across the country. On the other hand, aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed containers are 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 sold for commercial purposes is kept out of the purview of exemption. The intention of not levying GST on the supply of drinking water is clarified by CBIC vide circular No. 52/26/2018 dated August 9, 2018, which stated that the supply of drinking water for public purposes, if not supplied in sealed containers, is exempt from GST.
The AAR ruled that the water obtained from the CETP which has further undergone the processes of ultrafiltration and reverse osmosis in the ZLD plant, has a small amount of dissolved minerals and chemicals and is virtually free from all types of toxic materials. This treated water is used in various industries for their manufacturing-related processes. Further, looking at the presence of miniscule amounts of minerals in the water obtained after treatment from ZLD, it is covered under ‘de-mineralized water'. Hence, the treated water obtained from ZLD is not eligible for exemption.
Taxability –The 18% tax rate (9% CGST + 9% SGST) is applicable as the water is covered under entry no. 24 of Schedule-III of Notification No. 01/2017-CT(R). This indicates that the water, despite being highly treated and purified, is still subject to this standard GST rate.
Exemption Criteria: The exemption under entry no. 99 of Notification No. 02/2017-CT(R) typically applies to certain categories of water, such as natural water, not subjected to extensive de-mineralization or similar processes. Since the water in question is de-mineralized, it does not qualify for this exemption.
