In re Veerapandi Common Effluent Treatment Plant Private Limited (AAR GST Tamilnadu)
Introduction: The Authority for Advance Ruling in Tamil Nadu recently addressed a crucial issue regarding the classification and GST rate applicable to treated water sales. This ruling has significant implications for entities involved in the treatment and supply of water recovered from effluent processes. In this article, we will delve into the discussions and findings of the authority and provide a comprehensive analysis of the matter.
Detailed Analysis:
- Nature of the Applicant’s Business: The applicant in this case operates a common effluent treatment plant, primarily engaged in rendering hazardous waste treatment and disposal services. They recover treated water and salt from the effluent treatment process and supply these products to member units for reuse.
- Classification of Treated Water: The central issue examined by the authority was the appropriate classification of the treated water to be sold by the applicant. The applicant believed that the treated water fell under the category of “mineralized water” and should be classified under HSN 2201. They argued for an 18% GST rate under Schedule III of Notification No. 01/2017-CT(Rate).
- Comparison with Previous Rulings: The applicant referred to previous advance rulings in similar cases but found that they were not entirely relevant to their situation. The key point of contention was whether the treated water could be considered “demineralized water” as per the Customs Tariff Act.
- Examination of TDS Levels: The authority conducted an in-depth analysis of the Total Dissolved Solids (TDS) levels in the treated water. Test reports revealed that the treated water contained chlorides, sulphates, bicarbonates, and other elements. The TDS levels were found to be 294 mg/L, indicating that the water was not demineralized as per standard norms.
- Applicability of GST Exemption: The authority also examined the relevant GST notifications and circulars. It was noted that treated sewage water attracts a Nil rate of GST, as clarified by a Ministry of Finance circular. The circular emphasized that water under Heading 2201, with specified exclusions, is exempt from GST. The word “purified” was omitted from the entry in a subsequent notification.
- Final Ruling: Based on their analysis, the authority ruled that the treated water did not fit into the category of mineralized water, demineralized water, or any other specialized category. Instead, it was considered ordinary water, suitable for reuse by the member units. Consequently, it was classified under Sl. No. 99 of Notification No. 02/2017- Central Tax Rate, with an exemption from GST.
Conclusion: The recent ruling by the Authority for Advance Ruling in Tamil Nadu clarifies the classification and GST rate for treated water sales in the context of a common effluent treatment plant. The ruling emphasizes the importance of analyzing the specific characteristics of the treated water and its intended use. This decision has implications for businesses involved in wastewater treatment and underscores the need for a clear understanding of GST regulations in such cases.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TAMILNADU
M/s Veerapandi. Common Effluent Treatment Plant Private Limited, 548/1, Karuppagoundenpalayam, Cotton Market Post, Tiruppur – 641604 (hereinafter called as the ‘Applicant’) is registered under the GST Acts with GSTIN: 33AABCV9343F1.ZD.
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 colours, dissolved salts, organic load such as COD and BOD, 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 decoloured using liquid chlorine and then it is treated with sodium meta bi-sulphate/sodium thio 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-1 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. 02/2017-CT(Rate) dated 28.06.2017, 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. 02/2017-CT(Rate) dated 28.06.2017 provides exemption from payment of CGST for the following description of water:
