Cab operators seek GST exemptions

Hyderabad : A delegation comprising of representatives of different cabs operators of South India gave a representation to Union Minister of State for Finance Shiv Pratap Shukla and other senior officials in the Finance Department seeking relaxations in the GST for their industry. They also met Union Minister of Chemicals Ananth Kumar seeking his help in convincing Union Finance Minister Arun Jaitley to provide required relief to cab operators.

The delegation comprised of Telangana State Cabs & Bus Operators Association (TSCBOA) President Syed Nizamuddin and heads of other cab operators of other States.

Nizamuddin said services covered under SAC 9964 / 9966 are to be taxed at 2.5% (5%-IGST) with a condition that credit of input tax charged on goods and services used in supplying the service has not been taken. “The impact of this condition is that rent a cab operator has to bear all the costs of inputs charged by the vendor without having the benefit of input tax credit. Due to the above restriction of ITC if 5% option is selected, undue hardship has been cast on the rent a cab operator who uses services of another rent a cab operator, leading to double taxation of the same service in the absence of credit flowing to the subsequent rent a cab operator receiving such service. Practically, if one may look at there is only one service which is provided to the ultimate client by the borrowed rent a cab operator through the contracted rent a cab operator,” he said.

The cab operators requested that the Centre consider and allow input tax credit of rent a cab service provided to another rent a cab service operator irrespective whether the tax is paid on forward or reverse charge basis. “Else, this will lead to double taxation of the same service while increasing the cost of operations,” they said.

They said under the restriction of ITC if 5% option is selected, undue hardship has been cast on the rent a cab operator who uses services of another rent a cab operator, leading to double taxation of the same service in the absence of credit flowing to the subsequent rent a cab operator receiving such service. “Practically, if one may look at there is only one service which is provided to the ultimate client by the borrowed rent a cab operator through the contracted rent a cab operator, Syed Nizamuddin informed.

The TSCBOA chief, in his representation, said that many corporate entities were not allowing the rent a cab operator to go under the option of 12% as the incidence of tax is higher compared to 5%. Trade is suffering because of this issue as the business is drying and customers are not willing to accept invoices with 12% tax. “Even though the ITC benefit is allowed through 12% tax route, it is next to impossible for us to get the benefit out of the scheme. The operators cannot absorb the cost of RCM given the thin margins in the business,” he said.

Alternatively, the cab operators, requested the Centre to consider and allow ITC of 12% tax paid on rent a cab services availed by various business entities. “This will encourage the body corporate to allow the rent-a-cab operators to go under the option of 12% GST,” they said.

Further, they said the rent cab operators have to discharge the GST liability on or before 20th of every month irrespective of having received the payment or not from the Service Recipients/Customers. If ITC is allowed in the hands of the recipient then the payments would be monitored and would be made before 180 days as contemplated in Section 16 of CGST Act, 2017. “Due to this, the cost of doing business will go up and there will be huge cash outflow impacting the very existence of the business/trade,” they said.

“We plead single incidence of tax by service recipient or allow the ITC to the service recipient. The operators should not be burdened with tax of GST 5% on taxable turnover and again 5% GST on rent a cab services received from other operators. Further, the incidence of tax should not be based on type of vehicles operated under rent a cab service since the rates are predefined by per KM for various types of vehicle. Our understanding of GST Law is very similar to erstwhile regulations under the Service Tax Law wherein the rate of tax for renting services for all type of vehicles like Motor Cabs (Cars less than 6 seater), Maxi Cabs (more than 6 seater & Less than 12 Seater) and Buses (more than 12 Seater) were the same,” they said.

Syed Nizamuddin said that the self-employed passenger transport segment would have a new lease of life if the Centre considers the cab operators’ representations sympathetically.