GST Exemption for Treated Water Sold by Effluent Treatment Plants
The Tamil Nadu Authority for Advance Ruling confirmed that treated water sold for industrial reuse is exempt from GST.
- Ruling
- Advance Ruling No. 28 /AAR/2023 Dated: 30.08.2023
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked for the GST classification of treated effluent water.
- The Authority classified the water under HSN 2201.
- Treated water for industrial reuse is exempt from GST at a Nil rate.
- The water is not considered purified or de-mineralized for tax purposes.
In short
The company asked the Authority for Advance Ruling (AAR) whether the treated water they sell to member units is subject to Goods and Services Tax (GST). They process effluent water from dyeing units and wanted to know if this treated water qualifies for a tax exemption.
What has changed
How it worked before
Businesses were often unsure if treated industrial water should be taxed as purified or de-mineralized water, which would attract GST.
What has changed
The Authority ruled that this treated water is exempt from GST under Notification No. 02/2017-Central Tax (Rate). This means businesses in the same position do not need to charge GST on this specific supply, provided the water is for industrial reuse and not for human consumption or specialized purification.
Who this affects
Common effluent treatment plants and industrial units that process and sell treated water for reuse.
An example
A textile processing cluster operates a water treatment plant and sells the recycled water back to its member factories. They wonder if they must charge GST on these sales. Based on this ruling, they can argue that their water is not 'purified' or 'de-mineralized' in a commercial sense and is therefore exempt from GST.
What you should do
This ruling only applies to the specific company that asked the question. If you run a similar plant, you can use this reasoning to support your tax position, but you should consult your own tax advisor before deciding not to charge GST, as your local tax officer may have a different view.
If you do nothing
If you assume this ruling automatically applies to you and stop charging GST, your local tax officer may disagree. If they decide the water is taxable, you could be liable for the unpaid tax, interest, and potential penalties. Always confirm your specific situation with a professional.
The terms explained
- Effluent
- Liquid waste or sewage discharged into a river or the sea, or in this case, water used in industrial processes that requires treatment.
- HSN
- Harmonized System of Nomenclature, a code used to classify goods for taxation purposes.
- De-mineralized water
- Water from which all mineral salts have been removed, often used in specialized industrial or laboratory processes.
The ruling in detail
Authority for Advance Ruling
Angeripalayam Common Effluent Treatment Plant Limited
Advance Ruling No. 28 /AAR/2023 Dated: 30.08.2023 · Tamil Nadu
Questions before the authority
- What is the appropriate classification of the treated water that would be sold by the Applicant, after carrying out various treatment process on the effluent water purchased by them?
- What is the rate of GST applicable on the said treated water which would be sold by the Applicant?
Facts
The applicant is a common effluent treatment plant that processes effluent water received from member dyeing units to prevent environmental pollution. The treatment process involves various stages, including biological treatment, filtration, and reverse osmosis, to produce treated water suitable for reuse by the member units. The applicant sought a ruling on the classification and GST rate applicable to this treated water.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of treated water | Classifiable under HSN 2201 As per Sl. No. 99 of Notification No. 02/2017-Central Tax (Rate) |
| Applicable GST rate | Nil Eligible for exemption under the cited notification |
The Authority ruled that the treated water sold by the applicant is classifiable under HSN 2201 and is eligible for a Nil rate of GST. It concluded that the treated water is not de-mineralized or purified water in the commercial sense, but rather ordinary water suitable for industrial reuse, thus falling under the exemption provided in the relevant notification.
Reasoning
The Authority determined that the treated water does not meet the criteria for 'purified' or 'de-mineralized' water, as it still contains various salts and impurities. It relied on the interpretation that the water is intended for industrial reuse by member units and is not for human consumption or specialized uses. The ruling turned on the application of **Sl. No. 99 of Notification No. 02/2017-Central Tax (Rate)**, which exempts water other than aerated, mineral, distilled, medicinal, ionic, battery, or de-mineralized water sold in sealed containers. The Authority also drew an analogy from **Circular No. 179/11/2022** regarding the exemption of treated sewage water.
Provisions relied on
- Section 98(4) of the CGST Act, 2017
- Section 98(4) of the TNGST Act, 2017
- Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017
- Circular No. 179/11/2022 dated 03.08.2022
For the practitioner
This ruling provides clarity for common effluent treatment plants that the treated water supplied back to member units for industrial reuse is **exempt from GST**. It helps practitioners argue that such treated water is not 'purified' or 'de-mineralized' water under the GST tariff. However, it does not apply to water that is genuinely purified or de-mineralized for other commercial or human consumption purposes.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/28_angeripalayam_cetp.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
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