If you frequently book auto from Ola or Uber, be ready to spend more on services availed. The government of India has decided to that auto-rickshaws offered through online platforms will be subject to GST of 5 percent from January 1st 2022. In November, the Revenue Department under the Finance Ministry by way of a statement on November 18 revoked the GST exemption that was available to auto-rickshaws that provide passenger transportation services on online platforms.
While passenger transportation services offered by auto-rickshaw drivers in manual or offline mode will continue to be exempt, services delivered through any online marketplace would be tax-deductible with a rate of 5 percent from January 1st, 2022.
The amendment will directly impact the ride hailing comapnies, especially Ola and Uber, that accouts for a lion’s share of the market as a vast number of auto rickshaw drivers are already connected with these apps and rely heavily on it for find customers. The e-commerce industry has carved out an important position on the market in the field of providing transportation for passengers due to its lower cost, convenience and flexible way of making reservations for transport.
“The newly inserted provision would render rides booked through e-commerce platform costlier thereby creating tax disparity for the same service when provided through offline vis-a-vis online mode,” EY India Tax Partner Bipin Sapra said.
On the flip side, it will send a wrong signal to global companies looking to expand their servics in India, experts fears. Instead of creating a level playing field, such taxes will discourage people to enjoy the ease of auto booking services offered by these apps.
At the same time, it may lead to higher price demanded by auto drivers in an illegitimate way. Passengers safety and security is another concerns that the authorities will need to deal with, something that was dealt to a greater degree by these apps.
Quite recently the Indian government has decided to increase the GST rate on products and services belonging to various categories. Apparel, Texttile and Footwear will the affected the most as the revenue and tax contribution of thee industries are significantly higher compared to many other industries. GST on the aforementioned three industries is increased from 5% to 12% from January 01, 2022.