Uber and Ola In Hot Water: India Authorities Launch Fresh Probe!

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The Directorate General of Goods and Services Tax Intelligence (DGGI) sent a summons to Uber and Ola officials on Monday regarding tax evasion allegations against the two companies, Business Standard has reported.

The investigation will look into alleged tax evasions that took place between 2015 and 2017, according to sources. Since GST had not yet been enforced at the time, Uber and Ola have been charged with evading service taxes.

Despite the alleged offence being the same, the estimated liability for both companies varies greatly. While Uber has been slapped with an accusation of an evasion worth Rs. 800 crore, homegrown Ola’s dues are estimated to be Rs. 300 crore. However, this might not necessarily mean that the former committed a bigger crime.

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According to those familiar with the matter, the rates at which the dues of both parties were calculated were different. Uber’s tax liability was calculated at 15%, whereas Ola’s was calculated at a rate of 6%, creating a disparity of almost two-thirds. Reportedly, this gap occurred because two different agencies based in different cities were tasked with the calculations for each company.

While the probe has already been launched, the alleged evaded amount might change as the case evolves.

Uber and Ola’s Response: Promised Cooperation

Uber and Ola spokespersons confirmed the investigations but refused to offer further comments when reached out to.

“We are in receipt of a notice from the tax department relating to certain matters prior to 2017 in our mobility business. These pertain to the erstwhile service tax regime,” commented an Ola spokesperson.

They further went on to vouch for Ola’s clean tax practices, stating that the company abides by the law and has paid hundreds of crores of taxes in the past four years alone. The company is currently in talks with tax departments and assures cooperation.

Uber had a similar response, stating that it complies with tax laws and will cooperate with the investigation.

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GST Evasion also on the Cards

Even though the current probe pertains to activities conducted before 2017, Uber and Ola have also allegedly evaded paying goods and services taxes.

It seems that Uber and Ola have not been paying the GST on driver incentives and ride cancellation fees, two charges that are central to the cab-hailing services’ monetary network.

GOI Cracking Down on Tech and Tax Evasion Alike

The Government of India has progressively become more particular about taxes. In recent months, news of crackdowns on evasions and fraud has become increasingly common. What’s more, these reports are not only restricted to businesses but to individuals as well.

For instance, between November and December, the DGGI along with CGST arrested more than 215 people in cases related to fake invoices used to avail Input Tax Credit. At the same time, the IT department is currently investigating almost 7000 tax fraud companies.

In the future, companies that offer Software as a Service abroad may also come under the radar of the various tax departments and bodies for adopting a flipped structure. However, bigger tech entities are also part of the crackdown, as IT department officials recently went to Flipkart and Swiggy’s headquarters in Bengaluru for a bogus input tax credit.

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