18% GST payable on Drinking Water Supply through Mobile Tankers: AAR [Read Order]

GST - Drinking Water - Mobile Tankers - AAR - Taxscan

The Andhra Pradesh Authority of Advance Ruling (AAR) ruled that 18% Goods and Service Tax (GST) is payable on Drinking water supply through mobile tankers.

The applicant, M/s. Vijayavahini Charitable Foundation (VCF) undertakes, encourages, supports and aids charitable activities in relation to the poor in the areas of medical relief, education, health, vocation, livelihood, etc. It is also exempted under section 12A of the Income Tax Act, 1961. VCF has proposed to undertake the activity of providing pure and safe Drinking Water at an affordable cost for the underprivileged people in villages in the state of Andhra Pradesh where clean and potable drinking water is not available.

The applicant has sought the advance Ruling on the issue of whether the supply of drinking water to the general public in an unpacked/unsealed manner through dispensers/mobile tankers by a charitable organization at a concessional rate is covered under the exemption of GST as per SI.No 99 of Notification 02/2017-central tax (Rate) dated 28/06/2017.

The applicant contended that Entry No 99 of notification 12/2017 is applicable only if the water is sold in unsealed containers. In the instant case, water is sold in unsealed containers, which is an essential condition for the benefit of exemption. The villagers come and collect the water from the dispensing units/ Mobile Tankers. Moreover, the beneficiaries are the general public.

The coram of D.Ramesh and A.Shyam Sundar ruled that the principal supply is the supply of purified water whereas the service component of distribution through mobile units is the ancillary service. The purified water is eligible to tax at the rate of 18% as it is not fit for exemption under serial no.99 of notification No. 2/2017- Central Tax (Rate) dated June 28, 2017.

“It is invariably a composite supply and the rate of tax of purified water prevails, being the principal supply. The said supply is not covered under exemption and taxable at 18 percent,” the AAR noted.

The AAR has ruled that since the Vijayavahini Charitable Foundation is supplying purified water, it is not fit for GST exemption.

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