Uber, Ola users cheer as GST lowers fare taxes, leased cab programs suffer
Leasing of cabs will now attract a tax of 29-43 percent GST - depending on the car – compared to the earlier tax levy of 14.5 percent. Cab leasing programs of both Ola and Uber are likely to take a hit.
July 04, 2017 / 04:11 PM IST
An illustration picture shows the logo of car-sharing service app Uber on a smartphone.
The advent of Goods and Services Tax (GST) has brought cheer to users of cab aggregators such as Uber and Ola, as both the companies have decided to pass on the 1 percent benefit of lower taxation.
Transport services have been included in the lowest bracket of 5 percent under GST. Cab fares were being taxed at 6 percent earlier. While Ola communicated its users about lower prices for its cabs over a message, Uber India has also passed on the price difference to its consumers.
“The new rate structure at 5 percent as compared to the previous service tax rate of 6 percent is a step in the right direction by the government. Starting July 1, 2017, we will be charging 5 percent tax on trips instead of the earlier 6 percent,” Uber India spokesperson said in response to an e-mail query sent by Moneycontrol.
However, both the cab aggregators have raised concerns over a rise in leasing rentals. Must Watch: Uber faces a bumpy ride after Travis Kalanick’s exit
Leasing of cars will now attract a tax of 29 to 43 percent - depending on the car – compared to the earlier tax levy of 14.5 percent.
Drivers associated with the leasing programs of both the cab-hailing companies used to pay about Rs 800 a day as a part of the rental fee, which amounts to Rs 25,000 a month, for a financing period of 3-4 years.
“We run a leasing program for tens of thousands of driver-partners who may not be able to afford to buy a car of their own. They will have to bear GST rates of 29 to 43 percent on the cars already leased, as an outcome of double taxation on existing leases,” Shalabh Seth, CEO of Ola Fleet Techologies, said.
“This will have an adverse impact on their livelihoods, setting them back by over Rs 200,000 to 100,000 for the remaining period of the lease, making it unviable to sustain their business,” he added.
A few drivers attached to Uber and Ola’s lease program Moneycontrol spoke to also expressed helplessness. Suresh, an Uber driver in Bangalore feels he will have to give up the car and look for some other source of income.
This taxation hike for a large number of Uber-Ola drivers, who thrive on leased car model, may result in widespread protests. It is also likely that the leasing program of both companies could fear a major jolt with a hike in GST.
According to RedSeer Consulting, both Ola and Uber lost 25 percent of cabs associated with them in the March quarter.