Car Renting After GST Roll-Out

Cabs are one of the important necessities in metro cities as well as the places where modes of transportation are not easily accessible. Car renting is the easiest way to commute or to travel from one place to another as there is no need to stand in a queue for buying tickets or wasting your time in searching the transportation modes. Cabs have always provided the most comfortable way to travel or commute from one place to another. You can find several types of cabs such as basic cabs that can be hailed directly from the road, serviceable, or radio taxis such as Ola and Uber that can be booked using a phone or an app before you avail of the service. Although cabs are the most convenient choice to travel and commute, they are a bit expensive for daily commuters and even for those who are not a frequent traveler. It is, however, expected that after the implementation of the new taxation regime “GST online India”, things are going to be different and the rates of the rental cars will go down. Let’s discuss the changes that have been brought to the car renting industries everyone would want to know.

Radio Taxi

Radio taxi is a taxi that provides several benefits to the client by offering radio, GPS, safety, and two-way communication. However, according to the previous taxation system, service tax levied on the transportation modes with 60 percent abatement was applicable on radio taxis, stage carriage, and horse carriage. Therefore, the effective service tax which was levied previously on transportation modes was six percent.

Impact of GST on Rental Cabs

After the implementation of GST, there are no such changes seen in the tax structure for rental cabs. The same taxation system will continue for radio taxis, AC buses whereas the metered or yellow taxis are exempted from such taxes. The effective GST tax rate levied on rental cabs is 5% without the benefit of ITC (Input Tax Credit). Therefore, it is expected that the cab fares will decrease and thus the benefits will be passed on to the passengers as discounts or special pricing.

Reverse Charge Taxation Mechanism

According to the reverse charge taxation system, radio taxis are liable to pay GST taxes. Previously, there was a partial means of reverse charge mechanism which the service receiver and the service provider used to bear. However, after GST, the complex system ended up and now the tax has to be paid by the service receiver. For instance, the service provider is the cab driver and the service receiver is the ola, therefore ola has to bear the entire onus. In the case of ITC, the service receivers will be benefited from the services they provide to their customers.

The Bottom Line

If we talk about passengers, the GST has proved to be beneficial as it has reduced the traveling or commuting costs tremendously. GST online India has brought many positive changes for the Indian citizens and the Government is also making efforts to increase the economy and growth of the country. For more GST details, you can go for GST Keeper.