According to power companies the renewable energy certificates (RECs) which are bought by power companies is neither goods nor services so it should be kept out of the indirect tax ambit.
Power companies buy these certificates from renewable energy exchanges to abide by government norms that mandate that a certain percentage of power generated should be through renewable sources.
The certificates are derivatives based on the power generated in green route. Most power generators buy renewable energy from their green peers, sometimes based abroad.
These certificates also work as a source to buy the balance quantity of renewable energy that cannot be bought or generated directly by the power firms.
According to the power companies, a government circular that came out in June last year added to their woes. It talked about the applicability of Goods and Services Tax (GST) on the renewable energy certificates at 12%.
The power companies that buy these certificates to comply with the environmental norms challenged the levy through a writ petition filed in the Delhi High Court.
Reference- Economic Times, Government’s June’18 GST Circular