GST Rate of 12% Applies to Government Solar Water Treatment Contracts
Maharashtra AAR ruled that turnkey solar water treatment and supply contracts for government departments attract 12% GST as a works contract.
- Ruling
- NO.GST-ARA- 06/2018-19/B- 62 dated 09.07.2018
- Dated
- 09 Jul 2018
- 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
- Membrane Filters asked the GST rate for a government solar water project.
- The work included drilling, solar pumps, treatment plants, and laying pipelines.
- The authority ruled it is a composite supply of works contract.
- The project falls under Heading 9954 with a 12% GST rate.
In short
Membrane Filters(I) Pvt Ltd won a contract from the Public Health Engineering Department in Bihar to build 200 mini-piped water supply systems. The project required drilling tube wells, setting up solar-powered pumps, building iron removal plants, constructing civil structures, and laying distribution pipes to households. The company asked the Maharashtra Authority for Advance Ruling (AAR) in order NO.GST-ARA- 06/2018-19/B- 62 dated 09.07.2018 to clarify the Goods and Services Tax (GST) rate and HSN code for this combined work.
What has changed
How it worked before
Before this ruling, contractors executing multi-part infrastructure projects were uncertain whether to bill individual components like solar panels or pumps at their separate GST rates or to treat the whole project as a single construction service.
What has changed
The authority ruled that setting up an integrated water treatment and supply system is a single composite supply of a works contract under Section 2(119) of the CGST Act, 2017. Under Heading 9954 of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017-Central Tax (Rate), works contracts provided to a government department for water supply or treatment carry a concessional GST rate of 12% (6% CGST + 6% SGST). This means contractors do not need to separate out higher tax rates for individual goods like solar panels or pumps when supplying a complete water system to the government.
Who this affects
Engineering and infrastructure contractors undertaking complete turnkey projects for government departments or local authorities to build water treatment plants, solar pumps, and pipeline distribution networks.
An example
A construction company wins a state government tender to build solar-powered water filtration plants across rural villages. The contract requires supplying solar pumps, building concrete housing structures, installing filters, and connecting supply pipes to homes. The company is unsure whether to charge higher GST on the solar equipment or a unified service rate. Based on this ruling, the whole project qualifies as a composite works contract for water supply under Heading 9954, suggesting a unified GST rate of 12%.
What you should do
If your business executes similar government water projects, do not automatically assume this 12% GST rate applies to your business. An advance ruling binds only the company that asked for it and its local tax authority. Review your specific contract terms with a tax advisor or apply for your own advance ruling before issuing invoices.
If you do nothing
If you apply the lower 12% GST rate to your contract without proper classification, your local GST officer may disagree and reclassify the supplies at higher standard rates. You could be forced to pay the tax difference out of pocket along with interest and penalties. Government clients may also refuse to reimburse you for backdated GST adjustments.
The terms explained
- Works Contract
- A contract involving construction, erection, or installation on immovable property where ownership of materials is transferred along with the service.
- Composite Supply
- A transaction containing two or more naturally bundled goods or services sold together, where one main service defines the primary nature of the contract.
- Heading 9954
- The classification code under GST used specifically for civil construction, building, and installation services.
The ruling in detail
Authority for Advance Ruling
M/s Membrane Filters(I) Pvt Ltd
NO.GST-ARA- 06/2018-19/B- 62 dated 09.07.2018 · Maharashtra
Questions before the authority
- What is the rate & HSN code of GST applicable (after it's introduction from 1st July 2017) when Extracting water from tube well, passing it through treatment plant of removing unwanted contaminants like Iron from ground water and eventually lifting it to overhead tank (in short the scheme) runs on solar power.
Facts
The applicant was awarded a turnkey contract by the Public Health Engineering Department (PHED), Government of Bihar, for the design, construction, supply, and commissioning of 200 mini-piped water supply schemes with solar-operated pumps and iron removal treatment plants across habitations in Bihar. The scheme entails drilling tube wells, erecting solar-powered pumping systems, setting up iron removal units, constructing supporting civil structures, and laying distribution pipelines to households.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicable GST rate and HSN/SAC code for solar-powered mini-piped water supply and treatment scheme for PHED Bihar | TSH 9954; 12% GST (6% CGST + 6% SGST) Classified as composite supply of works contract for water supply/treatment supplied to State Government |
The Authority held that the execution of the project constitutes a **composite supply of works contract** provided to a State Government department for water supply and water treatment. It falls under Heading 9954 and attracts GST at the rate of **12% (6% CGST + 6% SGST)**.
Reasoning
The Authority observed that the contract involves civil work, erection, installation, and commissioning of pipelines and plants integrated into a single functional scheme for supplying treated water. This activity qualifies as a **composite supply of works contract** under Section 2(119) of the CGST Act, 2017. As per Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017-Central Tax (Rate) under Heading 9954 item (iii)(c), works contract services supplied to the Central/State Government or local authority by way of construction, erection, commissioning, or installation of plant or pipeline for water supply or water treatment attract **12% GST**.
Provisions relied on
- Section 2(119) of the CGST Act, 2017
- Heading 9954 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
- Notification No. 20/2017-Central Tax (Rate) dated 22.10.2017
For the practitioner
This ruling establishes that comprehensive turnkey contracts for setting up water treatment and supply schemes for government entities qualify as **works contract services for water supply**, taxable at the concessional rate of 12% under Heading 9954, rather than individual rates for constituent goods like solar panels or pumps.
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/maha-gst-ara-06-b-62_dt.0907.18_membrane_filters.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.