Is water supply a taxable service
Case Title | New Tirupur Area Development Corporation Limited |
Court | Tamil Nadu Bench AAAR |
Honorable Judges | Member Thiru G.V. Krishna Rao & Member Thiru M.A.Siddique |
Citation | 2021 (6) GSTPanacea 53 HC Tamil Nadu TN/AAAR/17 & 18/2021(AR) A.R.APPEAL NO.06/2021/AAAR |
Judgement Date | 30-June-2021 |
Council for Petitioner | Thiru.P.Giridharan |
Council for Respondent | NA |
Section | Section 98 (5) |
In Favour of | In Favour of Revenue |
The Tamil Nadu Bench of Member Thiru G.V. Krishna Rao & Member Thiru M.A.Siddique has held that it is clearly seen that the appellant has been awarded a contract for the sole purpose of supply of potable water to the purchasers, among others, after treating the raw water from the river bed. The activity of the appellant is thus only a supply of potable water to its purchasers. In other words, supply of goods and not of services. Since it is distinctly clear that the supply is of ‘water’ only, and NOT purified water, the same falling under the entry 99 of the notification no. 02/2017-CT (R) is qualified for the exemption.
Is water supply a taxable service
FACTS OF THE CASE
The appellant is registered under GST vide GSTIN 33AAACN3562H1ZP. The appeal is filed against the Order No. 5/ARA/2021 dated 26.02.2021 passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the appellant.
The Appellant is in the business of promoting infrastructure development activities in the area of water supply at New Tirupur. They had implemented an integrated water supply project for the town of Tirupur. In order to implement the integrated water supply and sewage treatment project for Tirupur City Municipal Corporation (TCMC), wayside villages and Tirupur Local Planning Area (TLPA), a Concession agreement was signed between the Government of Tamilnadu, Tirupur Municipality (now Corporation) and the applicant to implement a 185 million litre per day (MLD) water supply project expandable upto 250 MLD and a 15 MLD Sewage Treatment plant (STP) expandable up to 30 MLD at the total project cost of Rs. 1023 crore.; By virtue of the Concession Agreement entered and the mere nature of the activity, NTADCL assumes the responsibility under Article 243G and Article 243W contemplated under the sixth schedule of the Constitution of India.; They had signed a water drawal agreement with TN Government for drawing raw water up to a Maximum of 185 Million Litres Per day from the river Cauvery for supply towards domestic and non-domestic purposes within the Tirupur Municipality.
The Appellant had sought Advance Ruling on the following questions:
Whether the following activities of the applicant is taxable or exempt ?
The applicant not being the class of persons specified in Notification No. 14/2017-C.T.(Rate) dated 28.06.2017 as amended, they are not eligible for the said Notification
The activity of Sewage offtake and treatment extended to Tirupur Municipal Corporation as per the CA is exempt under SI.No.3 of Notification No. 12/2017- C.T.(Rate) dated 28.06.2017
The Consultancy Services rendered by the applicant to Tiruppur City Municipal Corporation in respect of the Project- Construction Management and Supervision Consulting Service to assist Project ULBs – Tiruppur City Municipal Corporation exempt under SI.No.3 of Notification No. 12/2017- C.T.(Rate) dated 28.06.2017
In respect of the activities incidental to main business activities, it is ruled as under
Interest on receivable on delayed payments being charges received for ‘Agreeing to tolerate an act’ classifiable under SAC 999794 is taxable @ 9% CGST and 9% SGST as per Sl.No. 35 of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 read with Sl.No. 35 of Notification No. II (2)/CTR/532(d-14)/2017 vide G.O. (Ms.)No.72 dated 29.06.2017 as amended for the reasons discussed in Para 13.1(a).
Cheque Bouncing Charges being charges received for ‘Agreeing to tolerate an act’ classifiable under SAC 999794 is taxable @ 9% CGST and 9% SGST as per Sl.No. 35 of Notification No. 11/2017- C.T.(Rate) dated 28.06.2017 read with Sl.No. 35 of Notification No. II (2)/CTR/532(d14)/2017 vide G.O. (Ms.)No.72 dated 29.06.2017 as amended for the reasons discussed in Para 13.1(b)
New connection works executed as per CA for TCMC, the established asset is accounted as their assets are not taxable being self-service for the reasons discussed in para 13. l(c ).
Connection/ Reconnection/ Disconnection/ Permanent Disconnection Charges are charges received for the services of ‘Water Distribution Services’ classifiable under SAC 9969 and is taxable @ 9% CGST and 9% SGST as per SI.No. 13 of Notification No. 11/2017- C.T.(Rate) dated 28.06.2017 read with SI.No. 13 of Notification No. II (2)/CTR/532(d-14)/2017 vide G.O. (Ms.)No.72 dated 29.06.2017 as amended for the reasons discussed in Para 13.1 (d)
But as regard to the activity of ‘supply of Water-goods’ by the applicant to the purchasers as per the CA, bench have different views on this aspect as discussed in Para 12.2 . Since bench have different views on this particular issue, bench are making a reference to the Appellate Authority for hearing and decision on this issue in terms of Section 98(5) of the Act ibid which provide that where the members of the Authority differ on any question on which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision on such question.
Based on the above decision, the Appellant has filed the present appeal.
Is water supply a taxable service
COURT HELD
Considering the facts as recorded, held that from the scope, language and the terms and conditions of the agreement, it is clearly seen that the appellant has been awarded a contract for the sole purpose of supply of potable water to the purchasers, among others, after treating the raw water from the river bed. The activity of the appellant is thus only a supply of potable water to its purchasers. In other words, supply of goods and not of services.
It can be safely concluded that the supply of the appellant is of raw water, treated to become ‘potable water’ and nothing more. Once it is distinctly clear that the supply is of ‘water’ only, and NOT purified water, the same falling under the entry 99 of the notification no. 02/2017-CT (R) is qualified for the exemption.
Is water supply a taxable service
ANALYSIS OF THE JUDGEMENT
Since purified water is excluded from the exemption entry, the point of contention appears to be that since the raw water is treated to various processes to make it potable, whether these processes make the raw water as a ‘purified water’ or it remains as Water treated’ to make it fit as potable water.
As discussed supra in para 7.3, not only the term used in the agreement for the supply denotes it is only ‘potable water’ which is supplied, but the treatment processes specified elsewhere in the agreement and the intent and the purpose of the whole arrangement is only ensuring sustainable supply of potable water. Potable water is never to be equated to ‘purified water’.
In fact, the meaning of ‘purified water’ depends on what use of it people have in mind, like whether it is for washing, pharma use, industrial use or even to swim. In chemical terms, purified water is pure H2O and only contains Hydrogen and Oxygen and no minerals. Distilled water is the most common form of pure water. However, potable water has only one meaning, water fit for human and animal consumption and has dissolved minerals.
Therefore, it can be safely concluded that the supply of the appellant is of raw water, treated to become ‘potable water’ and nothing more. Once it is distinctly clear that the supply is of ‘water’ only, and NOT purified water, the same falling under the entry 99 of the notification no. 02/2017-CT (R) is qualified for the exemption.
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