In the month of February, 2015, Arun Jaitley, Finance Minister had announced two crucial updates: Service tax would be increased to 14% from 12.36% and inclusion of ‘aggregator based’ services into the service tax net.
During the budget speech, he had said, “All aggregators which by means of an application and a communication device, enable a potential customer to connect with persons providing service of a particular kind under the brand name or trade name; shall fall under the service tax bracket,”
We had reported that this change in service tax will have long lasting impact on almost every service which we currently use; including apps and ecommerce.
And now, the effect is live from today!
Uber has emailed to all their customers about revised fares in respective cities, and this includes the extra burden of service tax.
As per the Uber’s notification, “In the Union Budget 2015-2016 presented by Honbl. Finance Minister, Mr. Arun Jaitley, an amendment was made to Service Tax rules. This change requires Uber – as an aggregator, on behalf of driver-partners – to collect and remit service tax on fares for all rides on the platform.”
For instance, if a customer decides to hire an Uber cab for going from Pune Airport to Aundh, the revised fares will be (in Pune):
- UberGo: Rs 211
- UberX: Rs 229
- UberBlack: Rs 441
For Mumbai, here are the revised rates:
| Base Fare (in Rs.) | Per Km Rate (in Rs.) | Per Minute Rate (in Rs.) | Minimum Fare (in Rs.) | |
| UberGo | 45 | 8 | 1 | 60 |
| UberX | 70 | 10 | 1 | 100 |
| UberBlack | 100 | 13 | 1.5 | 150 |
| UberSUV | 100 | 13 | 1.5 | 150 |
As per the notification from Uber, all rates showcased in their app or website would be all-inclusive of this increase in service tax, and the invoice would also showcase all-inclusive charges. Hence, there is no need to pay extra to the driver for service tax.
Interestingly, this service tax which has been introduced by the Finance Ministry is applicable on the total fare of the customer, and not on the commission generated by a transaction. Hence, the impact on the customer is more. On a hindsight, if the customer decides to directly select a taxi from its owner, then the service charge applicable would be less, as there won’t be any commission attached (which are charged by the aggregators such as Uber)
Last year, when Mumbai Tax Department sent a notice to Uber for not paying the tax, we had debated whether Uber really needs to pay the service tax? But after the Union Budget, it became clear that all aggregators need to submit tax.
After Uber’s announcement, we are expecting other aggregators such as Ola Cabs, Meru, including ecommerce portals such as Flipkart, Amazon and others to follow suit. No doubt an extra burden on the consumer but India as a nation will certainly get benefited.