In re Sirupooluvapatti Common Effluent Treatment Plant Private Limited (GST AAR Tamilnadu)
In a recent GST Advance Ruling (AAR) in Tamil Nadu, the appropriate classification and rate of GST for treated water sales were examined. The ruling had implications for a common effluent treatment plant that provides hazardous waste treatment and disposal services. This article delves into the key aspects of the ruling and its implications.
Detailed Analysis:
Background:
The applicant operates a common effluent treatment plant that treats effluent water purchased from member units, recovering water and salt for reuse. They initially paid GST at 12% under the classification of water treatment and disposal services (HSN 99943).
Zero Liquid Discharge (ZLD) System:
The Tamil Nadu Pollution Control Board (TNPCB) mandated the ZLD system for highly polluting industries, including textile dyeing and bleaching units. This system ensures the recovery of water and salt from effluent water, preventing pollution of rivers and groundwater.
Change in Operations:
The applicant proposed to purchase effluent water from member units, treat it, and sell the resultant products. This shift aimed to classify their activities as the supply of goods rather than services.
Classification of Treated Water:
The crucial question was the classification of the treated water to be sold. The applicant argued that it was demineralized water (HSN 2201) subject to an 18% GST rate. They claimed an exemption under Sl.No.99 of Notification No. 2/2017 – Central Tax (Rate) dated 28th June 2017.
Comparison with Precedents:
The applicant referenced earlier rulings, but these were related to purified drinking water and RO-treated water, which were not directly applicable to their case.
Debunking Demineralized Water Claim:
The analysis revealed that the treated water didn’t qualify as demineralized water (HSN 2853). Demineralized water, as per customs tariff, is highly purified and lacks mineral salts.
Ordinary Water Classification:
The treated water was deemed ordinary water, suitable for reuse in dyeing and bleaching processes. It fell under Sl.No.99 of Notification No. 2/2017, attracting nil GST.
Clarification via Circular:
A circular issued by the Ministry of Finance affirmed that treated sewage water attracted nil GST, reinforcing the classification of ordinary water in the present case.
Exclusion Clause Analysis:
The exclusion clause in Sl.No.99 of Notification No. 2/2017 listed specific water categories that weren’t exempt from GST. The treated water did not fit into any of these categories.
Maharashtra AAR Parallel:
A ruling in Maharashtra held that water from a sewage treatment plant was eligible for exemption due to the presence of impurities and foreign elements.
Intent of Effluent Treatment:
The effluent treatment process’s primary goal was to recover water, salt, and chemicals for reuse and environmental compliance, not to manufacture water or chemicals.
Conclusion:
The GST AAR in Tamil Nadu clarified the classification and rate of GST for treated water sales. The treated water was correctly classified as ordinary water, attracting nil GST under Sl.No.99 of Notification No. 2/2017 – Central Tax (Rate) dated 28th June 2017.. This ruling has significant implications for common effluent treatment plants engaged in similar activities.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,TAMILNADU
M/s Sirupooluvapatti Common Effluent Treatment Plant Private Limited, SF No. 632, Athuvazhi Thottam, Sirupooluvapatti Post, Tirupur, Pin.: 641 603 (hereinafter called as the ‘Applicant’) is registered under the GST Acts with GSTIN: 33AAJCS8719E1Z8.
2.0 In their application for Advance Ruling, the Applicant has stated, inter-alia, the following as their nature of activity proposed
(i) the Applicant is a common effluent treatment plant, set up by the various dyeing units in that area;
(ii) the Applicant is planning to buy the effluents from dyeing units and that the effluents will be delivered from the dyeing units to the Applicant through pipelines;
(iii) the effluent will be processed at the plant and the resultant treated water is to be sold to the dyeing units.
2.1 The Applicant has sought for advance ruling on the following questions;
1. What is the appropriate classification of the treated water that would be sold by the Applicant, after carrying out various treatment process on the effluent water purchased by them?
2. What is the rate of GST applicable on the said treated water which would be sold by the Applicant?
2.2. 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 Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017.
2.3 The Applicant has been established as a Zero Liquid Discharge (ZLD) plant, undertaking treatment of dyeing and bleaching effluents discharged / received from their member dyeing units, so as to completely prevent discharge of any effluent into the nearby water bodies.
2.4. As per the written submissions made, their main objective is to treat the effluents generated from all its member units. The effluent water is received from the member Dyeing units through pipelines and the effluent is subjected to various treatment processes to obtain reusable water with zero discharge of any effluents.
2.5. The effluent treatment, as explained by the Applicant, is as given below:
> The effluent, which consists of various colors, dissolved salts, organic load such. as COD and BUD, received from member Dyeing units is taken to the receiving sump through gravity pipeline. This is transferred to equalization tank and pH corrected to 7. For equalization process , they using blower system and diffuser arrangement for proper mixing. Backwash water, spillages, chemical cleaning water are also collected in equalisation tank.
> The equalized effluent is sent to biological treatment tank where it is subjected to activated sludge process to reduce organic load. This overflows into a secondary clarifier and the settled biomass is re-circulated back to aeration tank and excess is sent for sludge dewatering. The effluent then transferred to chlorine contact tank, where it is decolored using liquid chlorine and then it is treated with sodium meta bi-sulphate/sodium this sulphate to remove traces of chlorine. Then it enters the filtration system such Pressure sand filter, Micro filter, which remove suspended solids, turbidity and fines, organic, odour from effluent.
> The output product is collected in the reverse osmosis feed tank. The treated effluent is fed into three stage(I,II,III) RO system for removal of dissolved inorganic salts and 80 to 85% of water will be recovered as reusable water. Additional fourth phase(IV) . and fifth phase(V) of RO treatment is done through micron cartridge filter for desalination. RO IV & V reject is treated with Lime soda process in a Clarifier-I for hardness removal and pH correction then taken through RO VI through micro filtration for further concentration.
> Final RO VI reject is treated through MEE-1, MEE-2, MEE-3 for further concentration and portion to Brine solution preparation. The MEE-I concentrate and the MEE-2 mother liquor are sent to Brine solution preparation. Remaining RO VI reject is treated in MEE-2 &, MEE-3 for further concentration and where the salt is crystallized and removed pusher centrifuge. The mother liquor from MEE-3 is dried and powdered in ATFD(Agitated Thin Film Dryer). The Brine solution is treated with Lime soda process in Clarifier II for hardness reduction, the effluent pH is corrected and distributed to member units for reuse.
3.0. The Applicant’s interpretation of law/facts in respect of the questions raised, they submitted the following:
> The CGST payable on supply of various goods are prescribed under Notification 1/ 2017-CT(Rate) dated 28.06.2017, as amended, and Notification No. 2/2017 – Central Tax (Rate) dated 28th June 2017, as amended, provides for various exemptions from payment of CGST, for various supplies of goods.
> As per the First Schedule to the Customs Tariff Act, 1975, Chapter 2201 covers “Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening .matter nor flavoured; ice and snow”, and thus the heading is wide enough to cover the treated water and therefore the treated water would be classifiable under heading 2201.
> Sl.No.99 of the Notification No. 2/2017 – Central Tax (Rate) dated 28th June 2017 provides exemption from payment of CGST for the following description of water:
