Treated and purified sewage water is classified as 'water' under the GST Act and its supply for industrial use would attract an 18 per cent tax, the Authority for Advance Ruling (AAR) has said.
Nagpur Waste Water Management Pvt Ltd had approached the Maharashtra bench of AAR seeking a ruling on whether 'tertiary treated water' supplied by it to the Maharashtra State Electricity Generating Co Ltd (MAHAGENCO) is taxable under the GST law.
The AAR observed that the water supplied by the company to MAHAGENCO is obtained after treatment of sewage water and is not potable.
It noted that the applicant removes contaminants from sewage water, thus purifying it and making it useful for industrial purposes. Hence supply of 'tertiary treated water' to MAHAGENCO is taxable.
"We conclude and hold that the purified 'tertiary treated water' is covered under Entry no 24... the water obtained from sewage is covered under term waters. Hence it is taxable at 18 per cent (9 per cent SGST and 9 per cent Central GST)...," the AAR ruled.
Under GST, drinking water packed in 20 litres bottles are liable to 12 per cent tax and waters, including natural or artificial mineral waters and aerated water, not containing added sugar or other sweetening matter are taxed at 18 per cent.
AMRG & Associates Senior Partner Rajat Mohan said levy of 18 per cent GST on water procured in the industry will not have any impact for most of the sectors.
"However, this will negatively impact sectors to which no input tax credit is available which includes petroleum industry, alcohol industry, hospitality sector, residential housing sector," Mohan added.