Renewable power companies have moved the Delhi High Court, seeking to exempt the renewable energy certificates (RECs) from the goods and services tax (GST). The case will also have implications on priority sector lending certificates, used widely in the banking sector. These certificates current attract a GST rate of 12 per cent.
The court on Tuesday issued notices to the Centre, the GST Council and the Central Board of Indirect Taxes and Customs in this regard.
Explaining the case, Abhishek Rastogi, partner at Khaitan & Co. and counsel for the companies, said securities are defined as neither goods nor services under GST laws and hence are not taxable under the indirect tax regime.
For this purpose, the definition of securities is taken from a provision under the Securities Contracts (Regulation) Act.
Clause (h) of section 2 of the Act defines securities as shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate derivatives.
RECs fall under the definition of securities argued Rastogi. “These scrips are traded on IEX (Indian Energy Exchange) and PXIL (Power Exchange India Limited) and are electricity derivatives,” Rastogi said.
RECs are widely used in renewable purchase obligations by companies and states.
News Source: Business Standard