GST Exemption for Treated Water Sold by Effluent Treatment Plants
The Tamil Nadu Authority for Advance Ruling decided that treated water sold by effluent treatment plants is exempt from GST.
- Ruling
- Advance Ruling No. 29/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 industrial water.
- The authority classified the water under HSN 2201.
- Treated water sold for industrial reuse is exempt from GST at a Nil rate.
In short
A common effluent treatment plant asked the Tamil Nadu Authority for Advance Ruling (AAR) how to tax the water they treat and sell back to factories. The company wanted to know if this water should be taxed as de-mineralized water or if it qualifies for an exemption. The authority decided that because the water is meant for industrial reuse and is not pure de-mineralized water, it qualifies for a Nil rate of GST.
What has changed
How it worked before
Businesses were uncertain whether treated effluent water should be taxed as a chemical product or treated as ordinary water.
What has changed
The authority confirmed that this water falls under the same exemption as treated sewage water. For your business, this means you do not need to charge GST when selling this specific type of treated water back to your members.
Who this affects
Common effluent treatment plants and industrial units that process wastewater for reuse.
An example
Imagine a similar treatment plant in another state that processes wastewater for local textile mills. They might worry that selling this water makes them a chemical supplier subject to GST. Based on this ruling, they can argue that their product is ordinary treated water and should be exempt from GST under the same notification.
What you should do
If you operate a similar plant, you may use this logic to support your tax position. However, remember that an Advance Ruling only binds the specific company that asked and its local tax office; it is not a law that automatically applies to your business.
If you do nothing
If you assume this ruling applies to you and stop charging GST without confirming your specific situation, you risk a tax demand later. If a tax officer disagrees with your classification, you could be liable for unpaid GST, interest, and penalties. Always consult with a tax professional before changing your billing practices based on a ruling issued to another company.
The terms explained
- HSN 2201
- A specific code in the Harmonized System of Nomenclature used to classify water, including natural mineral and aerated waters.
- Zero liquid discharge
- An engineering process where all wastewater is purified and recycled, leaving no liquid waste to be discharged into the environment.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business transaction.
The ruling in detail
Authority for Advance Ruling
M/s Veerapandi Common Effluent Treatment Plant Private Limited
Advance Ruling No. 29/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 effluents received from member dyeing units to obtain reusable water. They perform various treatment processes, including biological treatment, reverse osmosis, and evaporation, to achieve zero liquid discharge. The applicant sought a ruling on the classification and GST rate applicable to the treated water sold back to member units.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of treated water | Classifiable under HSN 2201 As per Notification No. 02/2017-Central Tax (Rate) |
| Applicable GST rate | Nil rate Eligible for exemption under entry 99 of Notification No. 02/2017-Central Tax (Rate) |
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**. This is based on the finding that the treated water fits the description of water under entry 99 of Notification No. 02/2017-Central Tax (Rate).
Reasoning
The authority determined that the treated water is not de-mineralized water as claimed by the applicant, as it still contains various salts and impurities. It is considered ordinary water suitable for industrial reuse, which falls under the exemption provided by entry 99 of Notification No. 02/2017-Central Tax (Rate). The authority relied on the analogy of treated sewage water, which is also exempt under the same notification. The ruling emphasizes that the process is for environmental compliance and conservation rather than the manufacture of chemicals.
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
- Notification No. 7/2022-Central Tax (Rate) dated 13.07.2022
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 settles the classification issue by distinguishing such treated water from de-mineralized water. Practitioners should note that this exemption is specific to the context of water recovered for reuse in industrial processes to meet environmental mandates.
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/29_veerapandi_cetp.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
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