No GST Payable On Sewage Treatment Plant: AAAR

The appellant, Rashtriya Chemicals and Fertilisers Limited, is in the business of manufacturing and selling fertilisers and industrial chemicals. The appellant has its head office in Mumbai, has two manufacturing plants located in Maharashtra, and has warehouses and distribution networks across various states in India.

The appellant has a sewage treatment plant at its Trombay premises. The plant uses sewage water and converts it into water for use in the factory for the manufacture of the fertilisers.

The appellant has set up a new sewage treatment plant, which became operational on September 10, 2019, with the objective of becoming self-reliant in meeting the daily process water requirements of the Trombay unit.

The Appellant agreed to supply such treated water to Bharat Petroleum Corporation Limited (BPCL) for use in the refinery.

The appellant has sought an advance ruling on the issue of whether "treated water" obtained from STP (classifiable under Chapter 2201) will be eligible for exemption from GST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017-Integrated Tax (Rate) dated June 28, 2017 (as amended) having an entry as "Water (other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed container)".

The Maharashtra Authority for Advance Ruling (AAR) has passed an order in which it was held that "treated water" obtained from STP (classifiable under Chapter 2201) will not be eligible for exemption from GST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017- Integrated Tax (Rate) dated June 28, 2017 (as amended) and will be taxable at the rate of 18% in terms of the entry at the SI. Dated June 28, 2017, Notification No. 01/2017-Integrated Tax (Rate).

The AAR has noted that, as per the parameters tested by the Appellant, the properties of processed water generated from the sewage are different than the properties of the original sewage water received in the STP plant. Therefore, it was held that "treated water" is purified sewage water and, since it is purified water, the same will not fall under Sr. No. 99 of Notification 02/2017-Central Tax (Rate) dated June 28, June 2017.

The appellant has challenged the order of AAR on the grounds that the water obtained from STP is not 'purified water" and is thus eligible for exemption from GST under SI. no. 99 of Notification 02/2017—Integrated Tax (Rate) dated 28.06.2017.

The AAAR observed that the government, whether the Central Government or State Government, has never intended to tax water for general purposes. Even under the GST regime, the government has clarified its intention of not levying GST on the supply of general-purpose water by way of the issuance of Circular No. 52/26/2018 dated August 09, 2018, in which it has been clarified that the supply of drinking water, for public purposes, if not supplied in sealed containers, is exempted from GST.

"Thus, by applying the canon of "purposive construction", which gives effect to the legislative purpose/intendment, we are inclined to hold that the impugned product, which can aptly be construed as water of general purpose as discussed earlier, is eligible for exemption under the relevant entry at Sl. No. 99 of the exemption notification no. 02/2017-C.T. (Rate) dated 28.06.2017," the AAAR said.

Appellant's Name: MIS. Rashtriya Chemicals and Fertilizers Limited

Dated: 25.02.2022

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