The Andhra Pradesh Authority for Advance Ruling ( AAR ), in a recent ruling clarified that Intra-State supply of treated water is exempt from Goods and Service Tax ( GST ) by Notification.
The present application was filed by Greater Visakhapatnam Smart City Corporation Limited ( GVSCCL ), a body jointly operated by the State and the Urban Local Body by means of equity share holding.
GVSCCL is a body constituted by means of the Government of India’s “Smart City Mission” which established “Special Purpose Vehicles” ( SPV ) that would Plan, appraise, approve, release funds, implement, manage, operate, monitor and evaluate the Smart City development projects.
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The Vizag Municipality ( GVMC ) was vested with the responsibility to develop a sewerage infrastructure project in Visakhapatnam including creation of a sewerage network, facilitation of treatment of sewage water and carrying out all related activities.
GVMC, as part of its responsibilities had entered into multiple agreements with M/s Hindustan Petroleum Corporation Limited for the Supply of Recycled ( Treated ) Water while discharging its statutory duties under Section 243W of the Constitution of India.
Subsequently, all the duties and responsibilities of GVMC, including the discharge of any taxes arising during the course of supply of treated water was transferred to GVSCCL.
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The primary questions sought to be addressed by AAR was whether GST is applicable on the treated sewerage water supplied to various industries by GVSCCL, and if yes, what is the rate of tax applicable?
It was submitted by the Applicant that the nature of activity undertaken by the Applicant falls within the scope of ‘Supply’ as defined under Section 7 of the CGST Act, 2017 and Section 7 of the Andhra Pradesh GST Act, 2017.
Supply of Water was previously included under Serial No.24 of the Notification No.01/2017-C.T. (Rate) dated 28.06.2017 levying 9% GST. The mandate was subsequently amended via Entry No.99 of Notification No.02/2017 dated 28.06.2017.
The 2-Member Bench of AAR comprising K. Ravi Sankar, Commissioner of State Tax ( Member ) and B. Lakshmi Narayan, IRS Joint Commissioner of Central Tax ( Member ) observed that the water supplied by GVSCCL is not “purified” water but treated water used exclusively for industrial needs.
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In light of this observation, the Water is disqualified to be “Purified Water” as per “Common Parlance Test” and thus not exempt from Service Tax.
Despite this observation, AAR relied on the Government Clarification Circular No. 52/26/2018-GST dated 09.08.2018, issued by Central Board of Indirect Taxes and Customs wherein it has been clarified that supply of drinking water, for public purposes, if not supplied in sealed containers, is exempted from GST.
In consideration of the Clarification Circular, AAR ruled that the impugned goods,i.e, water supplied by the Applicant to various industries falls under Serial No.99 of Notification No.02/2017-C.T. (R) dated 28.06.2017 Entry 46B of Schedule II of Notification No. 06/2018-C.T. (Rate) dated 25.01.2018, therefore being completely exempt from GST.
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