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Uber, Ola face DG-GST Intelligence probe over alleged tax evasion

For several years now, the cab aggregators are alleged to have refrained from paying GST on the incentives they pay drivers. In addition, they have allegedly not paid GST on ride cancellations despite charging customers for the same.

January 11, 2021 / 04:33 PM IST
Ride sharing services (Representative Image)

Ride sharing services (Representative Image)


The Director General of Goods and Services Tax Intelligence has started an investigation into Uber and Ola. The DGGI has issued summons to officials of the two cab aggregators in relation to alleged tax invasion to the tune of hundreds of crores.

The DGGI has calculated a lability of around Rs 800 crore in tax dues from Uber India Private Limited. The liability of Bengaluru-based Ola Cabs has been fixed at around Rs 300 crore.

Both cab aggregators have confirmed that an investigation is being conducted by the DG-GST Intelligence. However, they have not commented on the tax liability.

Modus Operandi

The modus operandi of tax evasion in both the companies is alleged to be similar. GST Intelligence has apparently found that Uber India and Ola Cabs do not pay GST on the incentives paid to drivers. Explaining, a source close to the development said: “The companies have not been paying GST on incentives they pay to their drivers, which add up to a significant amount. And this has been happening for the last several years. So, the amount on which they have not paid taxes is huge.”

Secondly, the companies have allegedly not paid the GST amount on ride cancellations. When a customer cancels a trip, he or she is charged some amount but the ride hailers have allegedly not paid any GST on this amount.

Close

GST Intelligence found the companies had not paid taxes for several years and is calculating tax at the rate of 15 percent.

Aarti Sathe, Tax lawyer said "This investigation appears to be a fallout of the AAR ruling by Karnataka bench, that in the business of electronic commerce operators, the operator shall be liable to pay tax on the services provided by a motor cab".

Uber, Ola reactions

Speaking to Moneycontrol, an Uber spokesperson said: “Uber is a law abiding and compliant company. We are working closely with the authorities on all tax-related queries and will respond accordingly.”

Similarly, responding to a query on the probe, Ola Cabs said: “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. We have been actively engaged with the department and are cooperating with the tax authorities and are confident that we will be able to resolve this satisfactorily. Ola is a proud taxpayer and we comply with our tax obligations that contributed several thousands of crores in taxes over the last four years alone.”

Crackdown on evaders

Recently, the Income Tax department had conducted searches on Zee Entertainment Enterprises Limited, Larsen & Toubro, Swiggy and Instakart (a group company of Flipkart) for taking fake input tax credit.

A source close to that development told Moneycontrol: “GST Intelligence has found half a dozen more prominent tech-based companies that have evaded GST.”

In a recent interview, Finance Secretary Ajay Bhushan Pandey said: “We will be honouring the honest, but at the same time, we will not hesitate from doing things to deter those who try to cheat the system. I think there is now a sense among the fringe elements, who were trying to game the system, that it is not going to be so easy to continue in that fashion as the times have changed. And that is leading to better compliance.”

Pandey added: “We are today in a position to undertake data analytics to pinpoint those who are trying to game the system and take targeted action against such tax frauds. We have been able to identify 7,000 companies that have been issuing fake bills or using fake bills to evade GST and Income Tax.”
Tarun Sharma
first published: Jan 11, 2021 01:55 pm

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