The Maharashtra Appellate Authority for Advance Ruling has held that no legislative intent to tax water for general purposes and holds Tertiary Treated Water (TTW) eligible for GST exemption.
The appellant, M/s. Nagpur Waste Water Management Pvt. Ltd, has entered into a contract with Nagpur Municipal Corporation (NMC) with regard to setting up, and operating of Sewage Treatment Plant for the treatment of sewage water generated in Nagpur city. According to the agreement the appellant is being paid on the basis of agreed capital expenditure (CAPEX) and operating expenses (OPEX) by the NMC as a consideration. The said consideration is being charged by the Appellant from NMC along with the applicable GST.
The Appellant is also entitled to sell the Tertiary Treated Water to any person for non-potable application. Nagpur Municipal Corporation (NMC), Maharashtra State Electricity Generating Company Limited (MAHAGENCO) and the appellant had entered into a tri-partite agreement for supply of Tertiary Treated Water. Under the said Tri-partite agreement, the appellant was required to set-up a Tertiary Treatment Plant (TTP) to further treat water from Sewage Treatment Plant (STP) at Bhandewadi and supply the TTW to MAHAGENCO through Pipeline laid by the appellant from its Bhandewadi TTP to MAHAGENCO’s Koradi and Khaperkheda Thermal Power Plant. The water supplied is not potable drinking water but is suitable for the industrial use only. The appellant had supplied the “Tertiary Treated Water” to MAHAGENCO effective with the applicable GST@l8% (9% CGST and 9% SGST) on the value of the said supply of “Tertiary Treated Water”. However, MAHAGENCO disputed the payment of GST on the ground that “Tertiary Treated Water was exempt from tax under Notification No. 02/2017-Central Tax (Rate). Therefore, in view of the aforesaid dispute with MAHAGENCO, the Appellant had filed an Advance Ruling application before the Maharashtra Authority for Advance Ruling for seeking clarification on the taxability on the supply of the impugned product.
The MAAR has held that the “Tertiary Treated Water” is purified water and therefore, not exempt from tax. Aggrieved by the aforesaid Advance Ruling Order, the appellant has preferred appeal before the Maharashtra Appellate Authority for Advance Ruling.
The appellant submitted that on application of “the common parlance test” for finding the meaning of the term “purification”, it has been submitted that the term “purified water” means water for human consumption, which is not the case here. Further submitted that when there is more than one entry which may cover Tertiary Treated Water, the entry, which is beneficial to the assesse, needs to be adopted, and on applying this rule, it may be held that Tertiary Treated Water would be exempt from levy of GST.
The appellate authority observed that the Tamil Nadu AAAR order in the case of M/s. New Tirupur Area Development Corporation Limited (ORDER-in-Appeal No. AAAR/17&18/2021 (AR), wherein the Appellate Authority inter alia held as under: “In chemical terms, purified water is pure HO and only contains Hydrogen and Oxygen and no minerals; Distilled water is the most common form of pure water.” Water coming out from the Tertiary Treatment Plant still contains various biological contaminants, such as bacteria, virus, along with other impurities. Thus, it can be safely concluded that the resultant water is not pure due to presence of the said impurities and foreign elements. Thus, it is adequately clear that water containing anything apart from the Hydrogen and Oxygen will not be construed as pure water. It is further observed that even potable water, which is fit for human consumption, will also not be treated as pure water due to the presence of various minerals and other elements like chlorine, which are added in it to kill the harmful micro-organisms that cause diseases.
The division bench presided by Sri Ashok Kumar Mehta, Member (Central Tax) and Sri Rajeev Kumar Mital, Member (State Tax) while allowing the appeal has held that “we intend to agree with the appellant’s contention in as much as that the Government, whether the Central Government or State Government, has never intended to tax water of general purposes. Even under the GST regime, Government has clarified its intention of not levying GST on the supply of general-purpose water by way of issuance of the CBIC Circular No. 52/26/2018 dated 09 August 2018, wherein it has been clarified that supply of drinking water, for public purposes, if not supplied in sealed containers, is exempted from GST. Thus, by applying the canon of “purposive construction”, which gives effect to the legislative purpose/intendment, we are inclined to hold that the impugned product, i.e., TTW, which can aptly be construed as water of general purpose as discussed earlier, is eligible for exemption under the relevant entry at SI. No. 99 of the exemption notification no. 02/2017-C.T. (Rate)”.
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