Taxi operators and online cab aggregators currently collect about 6 percent service tax (including cess), from passengers
The GST Council on Friday made it clear that the radio taxi operators or cab aggregators will bear the full liability to pay the new rate of Goods and Services Tax (GST) as applicable from July 1, onwards.
Thus in these cases, even though the services are provided by the taxi drivers, the onus to pay the taxes will lie solely on the 'electronic commerce operator.'
The new rules will impact companies such as Meru Cabs, Mega Cabs, Ola, Uber, and car rental services such as Zoom Car and Myles.
As per the GST rules, transportation of passengers by air-conditioned contract/stage carriage or a radio taxi will be levied a 5 percent tax.
Renting of vehicles will be applied a 5 percent tax. However, if fuel cost is borne by the service recipient, then an 18 percent GST will apply to the service provider.
In a statement to Moneycontrol, Uber India welcomed the move. "We congratulate the government on this move. By ensuring that the new rate structure is not inflationary, the government has demonstrated its pro-consumer, pro-business stance. GST will simplify the tax regime in the country and we are excited to see how its impact unfolds across different sectors of the economy," said Amit Jain, president, Uber India and South Asia.
Taxi operators and online cab aggregators currently collect about 6 percent service tax (including cess), from passengers.
Experts say that taxation of services at multiple slabs (of 5, 12, 18 and 28 percent) would ensure balancing the tax burden based upon the nature of services and maintaining the parity with current rates. "It appears that this will ease the tax burden on certain services such as air travel, cab services and some goods as well," says Priyajit Ghosh, Partner – Indirect Tax, KPMG in India.In 2014, Uber India had agreed to pay service tax in India after initial resistance, according to media reports. The company had been debating with the government that the service tax should be collected with the drivers citing that Uber did not have any presence in the country and only provided through mobile or online application.