No GST on Supply of Desalinated Water for Distribution as Safe Drinking Water to Public: AAR [Read Order]

The Chennai bench of the Authority for Advance Rulings (AAR) has held that GST is not applicable on the supply of desalinated water for distribution as safe drinking water to public.

The applicant, Chennai Water Desalination Limited, is engaged in the activity of sale simpliciter i.e., sale of potable water, obtained after the process of desalination of sea water. The applicant approached the AAR to determine the tax liability of the applicant.

The bench comprising K Latha (Member SGST) and T G Venkatesh held that potable water is never to be equated to ‘purified water’. In fact, the meaning of ‘purified water’ depends on what use of it people have in mind, like whether it is for washing, pharma use, industrial use or even to swim. In chemical terms, purified water is pure H2O and only contains Hydrogen and Oxygen and no minerals. Distilled water is the most common form of pure water.

“However, potable water has only one meaning, water fit for human and animal consumption and has dissolved minerals. In fact, from the performance standards spelt out in Schedule C of the agreement, the quality of potable water would itself indicate that it does not attain the nature and quality of a `purified water’ on any count. Therefore, it can be safely concluded that the supply of the appellant is of raw water, treated to become ‘potable water’ and nothing morel Once it is distinctly clear that the supply is of Water’ only, and NOT purified water, the same falling under the entry 99 of the notification no. 02/2017-CT (R) is qualified for the exemption,” the bench said.

Concluding the order, the bench held that “Thus it has been held that the intent and purpose of the supply determines the nature of supply. Here the agreement has been specifically entered into for the setting up of 100MLD sea water Desalination plant on DBOOT basis for supply of desalinated water to CMWSSB for distribution to public as safe drinking water. Hence going by the agreement and following the judicial discipline of adhering to the decision of the Appellate authority cited supra, we conclude that the desalinated water supplied by the applicant to CMWSSB for distribution as safe drinking water is not liable to tax under the entry at Sl.no.99of Notification no.02/2017- Central Tax dated 28t.06.2017 based on the discussions above.”

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