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GST impact: Uber and Ola drivers may have to pay higher taxes on cab leases

The present tax rate of 14 percent in OLA and Uber is expected to go up to 29 percent, post GST.

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Uber and Ola drivers in India have already been facing the brunt of falling incentives, and potentially adding to their misery could be GST. Rolled out on July 1, India’s reformed tax structure could increase the EMIs of these cab drivers.

According to ET, the tax figures for Uber and Ola hailing firms are expected to go up to 29 percent from an earlier 14.5 percent. The report also suggests that the tax could range somewhere between 29 percent and 43 percent, as per company officials at Ola and Uber. Commenting on the new rate structure, Shalabh Seth, CEO of Ola Fleet Technologies told ET, “Presently, these driver-partners pay 14.5 percent VAT. In the proposed GST regime, they will have to bear GST rates of 29 percent to 43 percent on the cars already leased, as an outcome of double taxation on existing leases.”

As the report explains, most cab drivers enroll with leased vehicle, and thus the new structure is likely to spike their monthly installments. Reportedly, around 7,000 to 8,000 drivers are associated with Ola and Uber’s cab-leasing programmes, where drivers used to pay an EMI of around Rs 25,000 per month before GST kicked in. Now post GST, analysts suggest that drivers might have to pay an EMI of around Rs 35,000 to Rs 40,000. ALSO READ: GST: Apple slashes prices for iPhone, iPad, Apple Watch and Mac in India by up to 7.5%

“There is a service charge of around 18 percent plus over 20 percent vehicle sale tax on the leased vehicles that come under GST. The burden of paying this will ultimately come upon the drivers. However, it’s likely the drivers will try to renegotiate the contract but nullifying the existing contract will be a problem or they will try to return the cars to the company and get back their security deposit of around Rs 30,000,” said Jaspal Singh, partner at Valoriser Consultants.

  • Published Date: July 3, 2017 12:06 PM IST