Carbon Credits are goods: Liable to sales tax !!!

In a recent notification issued by the Government of Delhi it has been declared that the Certified Emission Reductions (or 'Carbon Credits' as we know) are goods and thus their sale is liable to value added tax in the State. The notification relates to a declaration made by the Commissioner of Trade and Taxes wherein the nature and aspects of Carbon credits have been examined and tested against the touchstone of the definition of goods to arrive at the conclusion that carbon credit are no different from ordinary commodities bought and sold in the market and thus a sale transaction of carbon credit would attract value added tax on sale.

The Notification inter alia states as under;

Carbon trading is a transaction of sale of carbon credits by an entity/unit which has earned/obtained Certified Emission Reductions (CERs) to an entity which is committed to reduction for emission greenhouse gases, but is not able to achieve the prescribed reduction in emission of greenhouse gases on its own. The CERs is certified by appropriate authority (Executive Board of CDM). The CERs, in essence, is a certificate having market value and is a tradable item/commodity. ... 

The operational mechanism of CDMs involves an investment by a legal entity from a developed country in a project in developing country, which results in emission reductions. The investment decision would include an agreement between the two parties and their respective countries on the dispensation and transfer of the emission reductions resulting from the project. These emission reductions have to be certified by an appropriate authority (the CDM Executive Board, provided for under the protocol) and then these certified Emission reductions (CERs) commonly known as carbon credits can be used to meet commitments under Kyoto Protocol. ...

A careful examination of the product called Certified Emission Reductions (CERs) commonly known as carbon credits shows that it is a certificate having market value. There are people/entities who are willing to sell and others who are willing to purchase such certificates. The intrinsic nature and value of carbon credits coupled with their free transferability makes the said product a marketable commodity. The said product is therefore covered under the definition of the term “goods” as it figures in subsection (1) of Section 2 of DVAT Act, 2004. 

Have a look at the notification.