In re Chennai Water Desalination Limited (GST AAR Tamilnadu)
1. Supply of desalinated water by the applicant to CMWSSB for distribution as safe drinking water to public falls under the entry at SI.No.99 of notification No. 2/2017-Central Tax (Rate), dated 28-6-2017 and attracts ‘NIL’ rate of GST.
2. Transaction of supply of safe drinking water by applicant to CMWSSB does not merit to be classified as ‘services’ and hence are not eligible for exemption under SI.No.3 Of the Notification no. 12/2017 dt. 28.06.2017.
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
Tvl. Chennai Water Desalination Plant Limited, No.30A, South Phase, 6th cross, Guindy, Chennai-600032 (hereinafter called the Applicant) are registered under GST with GSTIN 33AACCC6640F1Z1. The applicant has sought Advance Ruling on the following questions:
1. Whether GST is applicable on supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metropolitan Water Supply and Sewerage Board(CMWSSB) a Government Authority;
2. Ruling is sought for applicability of SI.No.99 of Notification no.2/2017 CT-(R) dt. 28.06.2017 for supply of water
or/and
3. SI.No. 3 of Notification 12/2017 for transaction of supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metro Water Supply and Sewerage Board, a Government Authority
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.
2.1 The applicant has stated that they are processing sea water in to potable water through desalination and they supply to Chennai Metropolitan Water Supply and Sewerage Board for distribution to General Public.
2.2 On interpretation of law, the applicant has submitted that SI.no.99 of Notification no.2/2017 CT-(R) dt. 28.06.2017 exempts HSN 2201- Water [other that aerated, mineral, purified, distilled, medicinal, ionic battery, de-mineralised and water sold in sealer container. Further, the applicant has stated that the clarifications issued vide Circular No.52/26/2018-GST dt. 09.08.2018. specifically addresses the issue on supply of safe drinking water for public purpose. The applicant has also stated that they have sought the Chennai South Commissionerate to provide clarification on the Applicability of GST on supply of “Desalinated Water”. In response, the jurisdictional Assistant Commissioner, Chennai South has brought in the clarification circular cited above and applied “drinking water for public purpose” and ignored the general wording “water” which falls under HSN 2201 and stands exempted as per Notification no.2/2017 CT-(R) dt. 28.06.2017. They have also stated that water whether supplied at a price or not are exempted as per Notification 02/2017 irrespective of whether supplied to different categories like domestic, industrial, institutions and commercial.
2.3 The applicant has also referred to Notification 12/2017 to substantiate their contention that CMWSSB is a Government Authority. They have also placed reliance on the Order No.22/AAR/2018 dated 28.11.2018 of Tamilnadu AAR, wherein it has been confirmed that CMWSSB is a Government Authority. They have also referred to SI.No.3 of Notification 12/2017 which exempts supply of pure services provided to Government Authority. In view of the above facts, the applicant is seeking the authority to clarify on the questions raised in para supra.
3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 22.10.2021. The Authorised Representatives Shri L. Raghu Rami Reddy, CFO, CA.V.Swaminathan, Consultant, M.Murali Mohan, AGM, Hari Venkataramana, DGM, F&A appeared for the hearing and reiterated their submissions. They stated that sea water does not belong to them and they do not pay any royalty/license fees; that the pipelines through which they supply the de-salinated water to CMWSSB for public supply also do not belong to them; that they undertake only the de-salination process. They were asked to furnish the copy of the agreement entered into with CMWSSB for such de-salination and supply; invoices raised on CMWSSB for such supply; and a write upon the entire process undertaken by them.
3.2 The applicant vide their letter dated 01.11.2021 (received on 12.11.2021) submitted that they supply desalinated water in bulk form to M/s.CMWSSB under Bulk Water purchase agreement and such water supplied in bulk form is exempted in earlier law by virtue of Notification no,12/2012-CE dt. 17.03.2012. With the introduction of GST, effective from 01.07.2017, they approached CMWSSB for the applicability of GST on supply of desalinated water, wherein CMWSSB responded to the applicant vide their letter ref: CMWSSB/Fin(Cont&supp)/2017-18/Spl dt. 22.01,2018, stating that as per SI.No.99 of Notification no.2/2017 CT-(R) dt. 28.06.2017, water falling under Tariff item 2201 is exempt from GST; that the entry is an exclusion based entry and the items not mentioned therein are exempt; that desalination process has not been included in the entry and hence is exempted; that the process of desalination is different from demineralization; that water is treated/desalinated exclusively for the purpose of human consumption, whereas the demineralized water cannot be used for human consumption because of its hazardous effects on human health and it is used exclusively for scientific purposes. Therefore applicant approached jurisdictional commissionerate for clarification and they were intimated that GST was applicable on desalinated water. Hence they started billing the invoice with GST which was not intended to be paid by their recipient namely CMWSSB. Hence they have filed this application for ruling.
3.3 They have also mentioned that their registered office has been shifted to the following address:
Tvl. Chennai Water Desalination Plant Limited,
Registered Office,
100 Mid Sea Water Desalination Plant,330/1, Kattupalli village, Ponneri Taluk, Tiruvallur Dist Tamilnadu-601203
3.4 They had enclosed the following documents:
> Write up on Desalination Process
> Bulk Water Purchase Agreement dt. 13.09.2005
> Copy of invoice No.CWDL/CMWSB/INV/SEP-2021/135 dt. 05.10.2021 issued to CMWSSB.
The applicant has submitted the following facts in their write-up:
> The applicant is a Special Purpose Vehicle(SPV) promoted and incorporated by a consortium of M/s IVRCL Infrastructures & Projects Limited (now M/s IVRCL Limited), Befesa Agua, Spain. The applicant has been awarded with detailed design, engineering, financing, procurement, construction, operation, maintenance and transfer of the seawater desalination plant on 25 years on DBOOT basis the client being CMWSSB.
> The applicant & CMWSSB have entered in to a Bulk water purchase agreement for implementation of the project, which is located in Minjur, Chennai. The SPV supplies the ‘desalinated water’ to CMWSSB in bulk form arising out of the activities undertaken by the applicant and as such, under the earlier law, the same being cleared as an exempted by virtue of Notification 12/2012 CE dated 17.03.2012.
> The process of desalination of sea water by the applicant is as follows:
i. Drawing of water from the sea and intake pump house to pump pretreatment process
ii. Pre-treatment
(a) Flocculation & clarifier settling
(b) 1st stage dual media gravity filters
(c) Intermediate pumping and pressure sand filters
(d) Cartridge Filtration
iii. Desalination-Reverse osmosis process
iv. Post treatment in product water tank •
v. Brine discharge
> The sea water after undergoing the above mentioned processes, would become ‘desalinated water’ or any other nomenclature that can be assigned to sea water which has undergone such processes as listed above. Hence, as per the notification 02/2017 CT(Rate) water is exempted from levy of GST.
4.1 On perusal of the submissions made by the applicant the following details were called for vide notice issued on 02.12.2021.
> From the conditions of the Bulk Water Purchase Agreement (BWPA), it was observed that the applicant abstracts sea water from the abstraction area on their own accord. Therefore, reasons for claiming the applicability of Sl.No.3 of Notification 12/2017 along with documentary evidences regarding the approval for drawl of water from the appropriate authority and such others were required to be furnished.
> Clarifications regarding whether the ownership of the plant constructed under the DBOOT has been transferred to CMWSSB or vests with the applicant as on date.
4.2 The applicant vide their letter dated 16.12.2021 received on 20.12.2021 submitted the following:
> They have entered into an agreement with CMWSSB on 13.09.2005 to set up 100 MLD Desalination Plant at Minjur, Chennai on DBOOT basis and a Copy of Master Agreement dated 05.01.2007 between CWDL, U.T.E Construccion Desaladora Chennai and BEFESA Infrastructure India(P) Ltd has been attached.
> CWDL draws raw water from sea unconditionally without paying any amount towards rolyalty; that they pay a licence fee for using the coastal land on annual basis to the Tamilnadu Maritime Board, Chennai. Copy of Form 26A Licence for the Allotment of Coastal lands has been enclosed.
