GST Exemption available on Sewage treated water: AAAR reverse Order of AAR

The Appellant is engaged in the business of manufacturing and sale of fertilizers and industrial chemicals. The Appellant has its head office in Mumbai and has two manufacturing plants located in Maharashtra and has warehouses/ distribution networks across various states in India.

The Appellant has a Sewage Treatment Plant (‘STP’) at its Trombay premises. This plant uses sewage water and converts it into the water for use in the factory for the manufacture of fertilizers.

The Appellant has set up a New Sewage Treatment Plant with the objective of becoming self-dependent in meeting the daily process water requirements of Trombay unit.

The Appellant has agreed to supply such treated water to Bharat Petroleum Corporation Limited (hereinafter referred to as ‘BPCL’) for use in the refinery.

Questions for which Advance Ruling was sought:

Q. Whether “Treated Water” obtained from STP [classifiable under Chapter 2201] will be eligible for exemption from OST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017- Integrated Tax (Rate) dated 28 June 2017 (as amended) having entry as “Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container]”?

Q. Whether “Treated Water” obtained from STP [classifiable under Chapter 2201] is taxable at 18% by virtue of SI. No. 24 of Schedule -III of Notification No. 01/2017 Integrated Tax (Rate) dated 28th June 2017 (as amended) as “Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavored [other than Drinking water packed in 20 liters bottles]”?

The ruling passed by Advance Ruling Authority (AAR)

“Treated Water” obtained from STP [classifiable under Chapter 2201] will not be eligible for exemption from OST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017 – Integrated Tax (Rate) dated 28 June 2017 (as amended) and the same will be taxable at the rate of 18% in terms of the entry at the SI. No. 24 of the Schedule III to the Notification No. 1/2017- I.T. (Rate) dated 28.06.2017.

Now this Ruling has been reversed by the Appellant Authority of Advance Ruling Authority (AAAR)

The ruling passed by Appellant Authority of Advance Ruling Authority (AAAR)

We, hereby, set aside the Advance Ruling Order No. GST-ARA-67/2019-20/B-57 dated 08.09.2021 passed by the Maharashtra Advance Ruling Authority, and hold that STP treated water will be eligible for exemption in terms of entry at SI. No. 99 of the Exemption Notification No. 02/2017-C.T. (Rate) dated 28.06.2017. Thus, the Appeal filed by the Appellant is, hereby, allowed.

To Read Ruling Download PDF Given Below: