In re Eastern Common Effluent Treatment Company Private Ltd (GST AAR Tamilnadu)
In the case of Eastern Common Effluent Treatment Company Private Ltd, several critical questions were raised concerning the classification and GST rate applicable to treated water sales. The company operates as a common effluent treatment plant, primarily engaged in hazardous waste treatment and disposal services. Their operations involve treating effluent water and supplying treated water, along with other recovered products, to member units for reuse. This article delves into the discussions and findings regarding the GST classification and applicable rate for the treated water sold by the applicant.
Detailed Analysis
1. The authorities carefully examined the facts and documents provided by the applicant, including submissions and comments from relevant jurisdictional authorities.
2. The applicant’s primary business involves treating hazardous waste and supplying treated water and recovered products to member units. They had previously classified their services under Group 99943, considering them as water treatment and disposal services, subject to a 12% GST rate.
3. To prevent pollution of water bodies, the Tamil Nadu Pollution Control Board (TNPCB) mandates Zero Liquid Discharge (ZLD) systems for highly polluting industries, including textile dyeing and bleaching. These industries consume significant water and salt during their processes. The applicant operates as a common plant to treat effluents from member units, aiming to recover water, salts, and other solids for beneficial reuse and achieving zero discharge.
4. The applicant plans to purchase effluent water from member units, treat it, and then sell the resultant products. This shift in operations implies classifying their activities as the supply of goods.
5. The initial question addressed is the appropriate classification of the treated water to be sold. The applicant considers it demineralized water, classified under HSN 2201, subject to an 18% GST rate and ineligible for GST exemption under Sl.No.99 of Notification No.02/2017-CT(Rate).
6. The applicant’s reference to advance rulings from other cases is considered, but it’s noted that these rulings are not directly applicable to the applicant’s case.
7. One of the rulings, involving Water Health India Pvt. Ltd., pertains to processing raw water for drinking purposes. The Gujarat AAR case also relates to selling purified water. However, these cases are not directly relevant to the applicant’s scenario.
8. The central issue revolves around the classification of treated water. The relevant entry in Notification No.01/2017-CT(Rate) lists specific types of waters under Heading 2201, subject to a 9% GST rate. It does not clearly encompass the treated water in question.
9. The applicant claims that the treated water is not demineralized and should be classified under Chapter 28 as per the Customs Tariff Act.
10. Demineralized water is characterized by minimal mineral content and is produced using various processes like deionization, distillation, and reverse osmosis.
11. Analyzing the applicant’s processes, the treated water still contains a significant amount of minerals, as indicated by a test report. It does not meet the standard criteria for demineralized water.
12. The treated water does not fit under Sl.No.24 of Notification No.01/2017-CT(Rate).
13. Sl.No.99 in Notification No. 2/2017- Central Tax (Rate) includes ordinary water, excluding special categories. The treated water is found to fall under this entry.
14. A circular issued by the Ministry of Finance clarifies that treated sewage water attracts a Nil GST rate.
15. The same principle is deemed applicable to the applicant’s case, with the treated water being categorized as ordinary water suitable for reuse by member units.
16. The treated water does not fall into any exclusion category in the entry.
17. In a similar case, the Maharashtra AAAR ruled that water from a Sewage Treatment Plant, even with impurities, qualifies for exemption under Sl.No.99 of Notification No.02/2017, CT (Rate).
18. The process carried out by the applicant aims to convert effluent water into treated water for reuse but does not render it completely pure.
19. The primary goal of the effluent treatment process is to recover water, salt, and chemicals for reuse and environmental compliance, rather than manufacturing water or chemicals.
20. Consequently, the ruling declares that effluent treated water is eligible for exemption under GST as per Notification No.02/2017- Central Tax Rate.
Conclusion
The ruling in the Eastern Common Effluent Treatment Company Private Ltd case establishes that treated water for sale should be classified as ordinary water under Sl.No.99 of Notification No.02/2017- Central Tax Rate. This classification results in a Nil GST rate, aligning with the aim of conserving water through recovery and reuse, especially in compliance with environmental regulations.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TAMILNADU
M/s Eastern Common Effluent Treatment Company Private Limited, SF No.7/1, Kasipalayam, Nallur Village, Vijayapuram PO, Tiruppur – 641 606 (hereinafter called as the ‘Applicant’) is registered under the GST Acts with GSTIN: 33AABCE5005D2ZE.
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:
