In a unique interpretation of the laid down regulations, the Maharashtra bench of the Authority of Advance Ruling (AAR) has termed treated sewage water as purified form of water, the supply of which is liable to 18 per cent GST.
The order over tax liability of Tertiary Treated Water (treated sewage water or TTW) came on an application filed by the Nagpur Waste Water Management Pvt Ltd to know tax liability of its supply of TTW to Maharashtra Generation Company or Mahagenco for industrial use.
Mahagenco refused to pay GST on the supply of TTW suggesting that the water supplied to it was not purified form of water as it it needed further treatment before use, and moreover, supply of such water did not attract any tax as entries on tax liability on water supply was only for aerated, mineral, purified, distilled, medicinal and ionic water.
Mahagenco had said that as electricity sold by it did not attract GST, it could not claim input tax credit on taxable receivables it used in the generation process. Moreover, any additional tax burden on it would raise the cost of electricity, affecting the tariff for the consumers.
But the AAR rejected the suggestion that TTW was just a form of normal water that did not attract tax.
It ruled that tertiary treatment is the final cleaning process that improves waste water quality before it is reused, recycled or discharged to the environment.
The treatment removes the remaining inorganic compounds and substances such as nitrogen and phosphorus.
Sewage treatment generally involves three stages — primary, secondary and tertiary treatment.
In short, tertiary treatment of water is the process of purification and the applicant is supplying purified water to MAHAGENCO, hence such supply of purified water, which has specific entry in GST tax schedule, would be taxed accordingly at 18 per cent, the AAR said.
The ruling has cleared the air over the use and supply of treated sewage water for industrial use. All such supplies would be taxed as it would be treated as supply of purified water. Purified here means that the water has undergone some process before it is being made fit for certain uses. This water cannot be termed as natural water that is free from tax.