The Goods and Services tax (GST), which will be implemented from July 1, 2017, has already put the vehicle industry, especially fleet vehicles and app-based aggregators in a spot of bother. The worry arises from the goods and services tax (GST) regime as the tax burden, which is currently a value-added tax of 12.5-13%, will rise to 43%, i.e. increase of over 30%.
As a result, the taxi aggregators such as Ola and Uber, which have leased over 25,000 cars between them, expect a similar rush next month onwards once drivers realise the GST impact on vehicles on the road. Currently these driver-partners pay 14.5% VAT. In the proposed GST regime, they will have to bear GST rates of 29% to 43% on the cars already leased, as an outcome of double taxation on existing leases. This will have an adverse impact on the livelihood of drivers setting them back by over Rs 1 lakh for the remaining period of the lease, making it unviable to sustain their business.
For instance, instead of the current tax of 13% on the sale of a Honda City that is returned, GST will be 43%. Hence, the tax burden on a Rs 4-lakh transaction will more than treble to over Rs 1.7 lakh instead of Rs 52,000 at present.
The industry is nervous over massive losses on existing business and are in talks with government to find solution to their problem. Industry sources estimated that with the implementation of GST, nearly one lakh existing car leases will be impacted due to an additional tax burden of over Rs 2,000 crore on customers and companies.
