Cab leasing to go costlier under GST

Cab drivers who has associated themselves with cab aggregators Ola and Uber might see their pockets being burned now that the goods and services tax (GST) has been implemented, given that they would have to pay more taxes for leasing.

As per officials from these companies, tax rates might be increased from 14.5% to somewhere between 29 and 43%.

This means that the drivers will now have to shell out an additional fee of approximately Rs 1 lakh per year, while their EMIs would also shoot up.

This has led to unrest amongst drivers who were already marred by falling incomes due to these companies cutting back on incentives.

"At Ola Fleet Technologies, we run a leasing programme for tens of thousands of driver-partners who may not be able to afford buying a car of their own. Presently, 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," Shalabh Seth, CEO of Ola Fleet Technologies, a wholly-owned subsidiary of Ola, told ET.

"This will have an adverse impact on their livelihoods, setting them back by over Rs 1,00,000 for the remaining period of the lease, making it unviable to sustain their business," he added.

This extra burden is because of a service charge of around 18% plus over 20% of vehicle sale tax on these leased cabs. It’s possible that these drivers might renegotiate the contract; however, nullifying the existing contract will also be a problem.