GST impact on cab services

In today’s lifestyle cabs are our basic need. Cabs and taxis are very important part in over transportation services. And now days it is an important sectors that provide good jobs.

Now we are discussed about what is impacted of GST on radio taxis companies and the cab operators.

after introduces of GST With cab service provider like Ola and Uber providing affordable services and  it can be said the market has achieve more opportunity for growth.

What is the provision of tax before GST on cab services?

Under service tax passengers by a contract carriage, a radio taxi, a motor cab and stage carriage will be available abatement in respected payment of tax that is rent a Cab service is 60% abatement and only taxable portion is 40%.

Let’s take an example

XYZ travels Pvt.Ltd. located in New Delhi is engaged in providing services of renting of motor cab. And the value of services rendered by the company during the month is Rs 6, 00,000

Than the value of tax liability  

Value of service is 6, 00,000

Now company get 60 % abatement and the value of taxable service is 2, 40,000 @15%

Tax payable is 36,000

REVERSE CHARGE MECHANISM:

Taxable service in relation to services provided or agreed to be provided by way of renting of motor vehicles designed to carry passengers, to any person who is not engaged in the similar business by any individual, HUF or a partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as a body corporate, located in the taxable territory.

Reverse charge will apply only if all the following conditions are satisfied:

1.Service is provided by way of renting of a motor vehicle designed to carry passengers.

2.Service provider should be an individual, HUF or a partnership firm, whether registered or not, including association of persons.

3.Service provider should be located in the taxable territory.

4.receiver should a business entity registered as a body corporate.

5.Service provider should be located in the taxable territory.

It is pertinent to note that reverse charge mechanism in respect of renting of motor vehicle is not applicable if service provider and service receiver are engaged in a similar business. It means No reverse charge will apply if the vehicles are hired to another person who is in the same line of business of renting of vehicles irrespective of the type of entity of service provider and service receiver.

Sr.No.	Description of Service	% of ST payable by Service provider	% of ST payable by Service receiver
1	2	3	4
	(a)    On abated value	Nil	100%
	(b)   On non-abated value	50%	50%

Impact of GST on Cab service 

The same provision will pursue under GST, that is the radio taxis and AC buses will be liable for tax. Metered cabs or auto rickshaws (including e-rickshaws) will not be liable to GST.

Reverse Charge Mechanism

As per the reverse charge notification, radio taxi companies are liable to pay GST pay under Reverse charge method.

On the behalf of Driver the company like Uber will be pay tax to the government on the reverse charge basics.

For example, a driver is to receive Rs. 200 as share of fare. Uber will pay Rs. 200 to the driver and deposit Rs. 10 to the government. On later providing the service to the passenger, Uber will collect GST on the fare. Uber pays GST on the drivers’ services on reverse charge basis. Uber can claim the ITC on tax paid under RCM and adjust with output taxes payable.

   

Input Tax Credit

Notification No. 20/2017-Central Tax, 22nd august 2017

Government will be give two option that

GST rate will be 5% without ITC.

GST rate will be 12% with ITC