GST Exemption on Supply of Drinking Water Through Tankers to IIT Goa: Goa AAAR Settles the Dispute

Background and Context

A significant ruling has emerged from the Goa Appellate Authority for Advance Ruling (AAAR) concerning the GST treatment of potable water supplied through tankers to an educational institution. The matter involved Shri Akhil Arun Naik, a registered assessee based at Tisk Ponda, Goa, holding GSTIN 30AQRPN4325L1ZM, who had undertaken a work order from the Indian Institute of Technology (IIT) Goa for the delivery of potable drinking water to its students.

The central question before the appellate authority was deceptively straightforward: Does the supply of drinking water through tankers or in bulk quantities to IIT Goa attract GST, or is it exempt? What made the case particularly noteworthy was the fact that the two members of the Goa Authority for Advance Ruling (GAAR) had arrived at diametrically opposite conclusions, necessitating a reference to the AAAR under Section 98(5) of the Goa Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017.

The Assessee's Supply Arrangement

The assessee had been engaged by IIT Goa to carry out staggered delivery of potable drinking water. As per the work order, water was to be sourced either from a well or from an RCC storage tank maintained by the Public Works Department (PWD), which served as the designated filling point for the tankers. The water was then transported via those tankers and delivered to the IIT Goa campus for use by its student population.

A notable feature of the work order was that the rates mentioned therein were stated to be inclusive of GST, meaning the GST component was not separately itemised. Given this arrangement, the assessee sought clarity through an advance ruling application on whether GST would at all be leviable on such bulk tanker-based supply of potable water.

The Conflicting Views at the GAAR Level

The divergence in opinion at the first-instance authority level forms the crux of why this matter escalated to the AAAR. The two members of the GAAR took fundamentally different positions:

SGST Member's View

The SGST Member concluded that the supply in question constituted a composite supply, with the supply of water being the principal supply. On this basis, the SGST Member held that the transaction was squarely covered under Entry No. 99 of Notification No. 2/2017-CT (Rate) dated 28.06.2017, which prescribes a NIL rate of GST on water, subject to specified exclusions. Accordingly, the SGST Member ruled the supply to be exempt from GST.

CGST Member's View

The CGST Member agreed with the characterisation of the transaction as a composite supply with water as the principal supply. However, the CGST Member took an additional step and examined the nature of the water itself. Observing that the water supplied had been subjected to chlorination before delivery, the CGST Member concluded that chlorinated water falls within the category of "purified" water, which was listed as one of the exclusions under Entry No. 99. On this basis, the CGST Member held that the supply was taxable at 18% GST under Chapter Heading 2201 at Sr. No. 24 of the said notification, rather than being exempt.

This irreconcilable difference of opinion triggered the automatic referral to the Goa AAAR under Section 98(5) of the GST Acts.