GST on Water Supply: Rate, HSN Code, Exemption, and Packaged Water

GST on water supply in India depends on the type of water supplied, with ordinary drinking water generally exempt from GST while packaged and mineral water attract GST at 18%. Check the applicable GST treatment for water supply, water products and related services.

In summary

• GST on water supply in India varies based on the nature of the supply, with ordinary drinking water generally exempt from GST and packaged, mineral and aerated water typically attracting GST at 18%.
• Water supplied through municipal bodies and government authorities is generally exempt when supplied for public purposes under applicable GST provisions.
• The GST treatment of tanker water, treated water and water supply services depends on the nature of the supply and the applicable classification.
• Businesses involved in water treatment, distribution and commercial supply should use the correct HSN classification and GST treatment to maintain compliance.
• This page covers GST on water supply, HSN classifications, GST rates, exemptions for drinking water, GST on packaged water, tanker water supplies and water treatment services.

Water is an essential commodity used for drinking, domestic purposes, agriculture and industrial operations. Under the Goods and Services Tax framework, the GST treatment of water depends on the type of water supplied and the manner in which it is delivered.

While ordinary drinking water generally enjoys GST exemption, commercially packaged water products and certain related services attract GST at prescribed rates. Understanding these distinctions is important for suppliers, distributors, businesses and consumers.

What is GST on water supply?

GST on water supply refers to the tax applicable to the supply of water and water-related services under India's Goods and Services Tax regime. The GST treatment depends on whether the water supplied qualifies for exemption or falls under a taxable category.

Ordinary drinking water supplied in non-packaged form is generally exempt from GST. However, packaged drinking water, mineral water and aerated water typically attract GST at applicable rates.

HSN code for water under GST

Different categories of water are classified under specific HSN codes for GST purposes.

Correct classification is essential because GST liability depends on the applicable HSN category.

GST rate on water supply in India

The GST rate applicable to water depends on the nature of the product or service supplied.

The GST treatment should always be determined based on the specific nature of the water supplied.

GST exemption on ordinary drinking water

Ordinary drinking water supplied in non-packaged form is generally exempt from GST.

Key points include:

• Water supplied through public pipelines is generally exempt.
• Non-packaged drinking water typically does not attract GST.
• Water supplied by local authorities for public consumption is generally exempt.
• Exemption applies only where the supply satisfies applicable GST conditions.
• Businesses should maintain proper records supporting exempt supplies.

The exemption helps ensure that access to basic drinking water remains affordable for households and communities.

GST on packaged, mineral and aerated water

Commercially packaged water products attract GST because they are treated differently from ordinary drinking water under GST law.

Key points include:

• Packaged drinking water generally attracts GST at 18%.
• Mineral water generally attracts GST at 18%.
• Aerated water generally attracts GST at 28%.
• GST is charged on the transaction value of the product.
• Manufacturers and distributors can claim eligible Input Tax Credit subject to GST provisions.

Example

A retailer in Pune purchases packaged drinking water worth Rs. 1 lakh. At an 18% GST rate, the GST component amounts to Rs. 18,000, resulting in a total invoice value of Rs. 1.18 lakh.

GST on water supplied through tankers

The GST treatment of tanker water depends on the nature of the water supplied and the purpose of the supply.

Important considerations include:

• Tanker supply of ordinary drinking water may qualify for exemption in certain circumstances.
• Commercial supply arrangements should be evaluated based on applicable GST provisions.
• Classification depends on the nature of the water and the recipient.
• Suppliers should issue invoices reflecting the correct GST treatment.
• Businesses should maintain records supporting their classification position.

Scenario example

A residential society in Hyderabad receives ordinary drinking water through tankers during a temporary municipal water shortage. The GST treatment depends on the classification of the supply and applicable GST provisions.

GST on municipal and government water supply

Municipal and government water supplies are generally exempt from GST when supplied as part of public utility services.

Key points include:

• Water supplied by municipal authorities is generally exempt.
• Government water supply for public purposes generally remains outside the GST net.
• Exempt treatment helps reduce the cost burden on households.
• Public water supply systems continue to operate under applicable government regulations.
• Businesses supplying services to water authorities should separately evaluate GST implications for those services.

These exemptions support public access to essential water services across urban and rural India.

GST on water treatment and supply services

Water treatment and supply services can attract GST depending on the nature of the service provided and the recipient.

Key points include:

• Water purification services may attract GST under applicable service classifications.
• Industrial water treatment contracts generally attract GST.
• Operation and maintenance services for water infrastructure may be taxable.
• GST liability depends on the contractual arrangement and service classification.
• Service providers should review the applicable GST provisions before invoicing customers.

Example

A water treatment company in Ahmedabad enters into a contract to provide industrial water treatment services to a manufacturing unit. The GST treatment will depend on the applicable service classification and contractual terms.

Understanding GST implications for water supply businesses

GST on water supply varies significantly depending on whether the supply relates to ordinary drinking water, packaged water products, municipal supplies or commercial services. Businesses involved in water treatment, distribution and supply should determine the correct HSN classification, GST treatment and compliance obligations before issuing invoices.

Businesses planning to expand water infrastructure, purchase equipment or strengthen working capital can explore business loans to support operational requirements. Before applying, it is advisable to review the applicable business loan interest rate and estimate repayments using a business loan EMI calculator. Bajaj Finance enables eligible applicants to check their pre-approved offers online and evaluate financing options suited to their business requirements.