After paying GST of 12% on renewable energy certificates (RECs), renewable energy project developers who are part of the REC mechanism have approached the Delhi High Court to provide relief in the matter and stop the levy of GST on RECs.

According to a report by Business Standard, “The Delhi High Court on Tuesday issued notices to the center, the GST Council, and the Central Board of Indirect Taxes and Customs in this regard.”

When contacted, an IEX official informed that after the Supreme Court allowed trading of RECs, GST of 12% has been levied on the trade of RECs. The government had informed the power exchanges that RECs will attract GST as they are a paper commodity.”

According to the IEX source, “Since September 2018, IEX has been undertaking steps so that they make the levy of GST easy for entities trading on its platform. Right now, we have a portal wherein all entities trading on IEX can pay GST and the same (GST credit) is reflected immediately on the portal once a buyer buys RECs.”

Talking about the legality of levy of GST on REC, the IEX source said, “Electricity does not attract levy of GST. REC has an underlined asset that is out of the ambit of GST, but REC also has a separate existence and trade in REC is separate from trade in electricity.” Even energy saving certificates attract GST as they are paper commodities,” added the source.

When asked why have the entities approached the High Court for relief when this a standard procedure, a market insider informed that the buyer of REC does not have to pay GST, the seller has to. All these companies have come into REC mechanism as it offers more return compared to normal PPA, GST is taking a chunk of the profits away.”

Mercom recently reported that after a surge in February 2019, the trade in solar renewable energy certificates declined in March 2019. When asked whether this was due to GST, the IEX source said, “No, not at all; this was due to low inventory, nothing else.”