It is the matter of confusion that why there is GST on the renewable energy certificates and no tax on the power itself. The trade industry found it very weird that there is a GST on the RECs and there is no provision of GST on the electricity so far.
AN expert from the wind industry stated that “Since there is no GST on the trade of power, why is there a tax on RECs?.” Also, there is confusion on the rate on which the GST has been charged.
A circular from the Indian Energy Exchange (IEX), reads that, “The CBEC, GST (Policy Wing) vide its letter dated January 4, 2018, has clarified that the Goods & Service Tax is applicable on the Renewable Energy Certificates (RECs), however, the rate and HSN number applicable was not mentioned.”
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As the HSN is nowhere, the IEX itself came forward and clarified that the applicable taxes will be according to the HSN Code 4907 0090 which demand a tax rate 12 percent. The clarification has been done to all its consumer and clients.
An IEX official told that “Since January we started collecting price of the REC and the supposed tax rate from the buyers.”
According to the past decision taken by the supreme court, it has allowed the trade of non-solar RECs which led to the strong trade of the RECs with 32.39 lakh transactions during December 2017 coming to the worth of 485.87 crores.
But as soon as the GST was applicable the trade of RECs was crashed and it saw a steep decline in the trade price and revenue collections accounting for the only 2.7 crores.
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Not only this, the government also taxed Priority Sector Lending Certificates (PSLCs) under the rate of 18 percent. The IEX said that “This clarification has caused some confusion about the rate applicable on the RECs and few members of the exchange have raised queries whether 18 per cent GST rate is also applicable on the REC.”
