Sales tax of 5pc, not 13pc, levied on ride-hailing services: Sindh govt

KARACHI: The Sindh Revenue Board (SRB) clarified on Sunday that the provincial government had imposed a sales tax of five per cent, and not 13 per cent, with effect from July 1 on services rendered by cab aggregators or ride-hailing services.

The Sindh budget for 2019-20 has declared the services provided or rendered by cab aggregators (also known as ride-hailing services), including the service given by cab drivers (also known as “cab services” or “rent-a-car services” or “taxi services”) a taxable service. A reduced sales tax rate of five per cent has been imposed on the total component (i.e. the component of both the cab aggregators and the component of its cab drivers) .

There is no truth in the propaganda that the rate will be 13 per cent and have an effect of 26 per cent, the SRB said.

The rent-a-car and vehicle renting services, including radio cab service such as metro cab, white cab etc, were already paying a sales tax of 10 per cent. “Although the services of cab aggregators and cab drivers related thereto compete with such rent-a-car services or radio cab services, the former remained outside the tax net on one pretext or the other causing discriminatory tax disadvantage to their competitors,” stated the SRB.

The levy of sales tax at a reduced rate of 5pc on taxi services based on online market platform still provides a tax advantage to the service providers, the board claimed.

“There is no force in the argument that tax advantage be provided to taxi services based on online market platform on the ground that it provides employment to general public.”

The goods and services of every manufacturer or producer or service provider generate jobs, but they have to pay taxes as well, the SRB added.

The ride-hailing services and the cab services based on their online market platform pay sales tax/service tax/VAT on the total price at the respective standard rates (which are higher than the Sindh’s standard Sales Tax rate of 13pc) in India, the United Kingdom, Australia and several EU members and other countries.