RE companies move to the high court requesting exemption from GST on RECs

Renewable Power companies have moved to the Delhi High Court requesting an exemption from Goods & Service Tax on the REC certificates. Currently, there is a GST rate of 12% applied to Renewable Energy Certificates. The Delhi Court had issued notices on Tuesday to the center, the GST council & the Central Board of Indirect Taxes and Customs in this regard.
According to the Counsel of the petitioner companies securities are defined neither as goods nor services under GST laws & hence are not taxable under the indirect tax regime.
As per the Securities Contracts Act regulations, under Clause 2 (h) Securities include “shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or another body corporate;”
RECs fall under the definition of securities. “These scrips are traded on IEX (Indian Energy Exchange) and PXIL (Power Exchange India Limited) and are electricity derivatives,” the Counsel head believes.
Currently, since the GST is levied on the RECs, RE companies are unable to trade Renewable Energy Certificates if they have incomplete GST registration (KYC) in turn unable to reach their REC obligation. Further, apart from being a financial burden, GST is an operational burden. Also, since there are multiple parties involved in the trade process (Exchanges, sell&buyer, and trading members) it becomes an overwhelming task to understand the GST impact on each of them. This makes REC trading a tedious process.