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Aggregators Too Get a Service Tax Reminder

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Taxman sends letters to new-age cos such as Foodpanda, Oyo Rooms and Airbnb to check if they are paying tax
Aggregators such as Foodpanda, Oyo Rooms and Airbnb have been asked whether they are paying service tax.
“Letters were sent to ascertain if these entities are registered with the department and paying due tax,“ said a department official.
This seems to be part of a `friendlier' approach to alert service providers of their potential liability, in line with the Centre's desire for a non-adversarial tax regime that's more welcoming to investors.
The official said most entities had registered them selves and some had sought fur ther clarifica tions on proceprocesses as the dures and processes as the provision dealing with this particular area is fairly new.
While the rapidly expanding sharing economy offers vast potential for tax revenue, the task can be challenging as in some cases there is no brick-and-mortar presence for these firms.
Foodpanda, which aggregates restaurant ordering, said it had got the letter. “We did receive a query from the service tax department,“ a spokesperson said. “The authorities have conducted an extensive review of our accounts and have found no irregularities so far. We are registered and duly pay our taxes,“ a FoodPanda spokesperson said. Hospitality aggregators Oyo Rooms and Airbnb did not respond to ET's questions.
All services attract tax at the rate of 14% (excluding the Swachh Bharat cess) unless it's included in a negative list or specifically exempted by the government. Service tax revenue has risen 26% in the first seven months of the current fiscal from the year earlier. It's budgeted to become the second biggest indirect tax in this fiscal, overtaking customs.
The government included a provision in the February Budget making it mandatory for such entities to register with the department and pay tax. This followed the Uber service tax case in Mumbai over the San Francisco-based, taxi-hailing app offering luxury cabs.
It also applies to entities that don't have any representative office in the country. “In respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India, is being made liable to pay service tax if the service is so provided using the brand name of the aggregator in any manner,“ according to the provision.
“If an aggregator does not have any presence, including that by way of a representative, in such a case any agent appointed by the aggregator shall pay the tax on behalf of the aggregator.“
Taxation of technologybased businesses has emerged as a significant challenge for policymakers worldwide. The OECD has worked out a plan to tackle taxation in the ecommerce space that countries will implement over time.
The Economic Times, New Delhi, 18th Nov. 2015

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