Background:-
The aggregators who were not specifically covered under the service Tax till now because of the interpretation in the law . To cover the services of App based Cab (aggregators) this concept has been introduced in finance bill 2015. The owner of the app is doing the business from outside India by just connecting the customer to service provider. For Example :- Uber, Ola. These companies desgined their mobile apps and tied up with the people who have personal cars that could be used as cabs. Uber is not owner of the cabs it is just mobile app which connects the customer with the cab driver. These companies gets a commission on every ride by the customer.
It was difficult for the government to collect the tax from cab drivers and simultaneously was not able to collect the tax from the mobile app holders as well. So it was loss of revenue to the government. Hence, the government has specifically introduced to cover the agreegator.
Definition of aggregators under rule 2(1)(aa) of service tax rules 1994:-
A person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with the persons providing service of a particular kind under the brand name or trade name of the aggregator.
General View:-
In normal words aggregator is nothing but providing a platform to various service providers to provide their services by using brand name of aggregator and also it connects the potential customers to service providers. For providing the platform to various service providers the aggregator will be charging some consideration. Hence the aggregator needs to pay service tax. As far as my view, many people doesn’t have clarity that why it has been introduced in reverse charge notification? The answer for the above question is the sec 2(d) of Service tax rules 1994 starts with “Person liable for paying service tax”.
It is no where given that under reverse charge only service receiver has to pay. The concept of reverse charge has been introduced to put the responsibility on any person other than service provider like service receiver or intermediary. Aggregator is playing the role of intermediary. The defence of aggregators was that they are neither providing any services nor there is specific provision regarding aggregator but in budget 2015, specific provision has been introduced regarding aggregators. However the ultimate effect will be either increase in fare which uber is charging to the customers or the decrease in the profit of the driver.
For example :- In case the service is provided by uber cab which is acting as a service provider and he charges Rs 200/- and for the same he is hiring one cab driver for rendering the service. In such a case he needs to pay service tax on his commission i.e. Rs.20/- and also by virtue of amendment made in finance bill 2015 he needs to pay the service tax under reverse charge on the balance amount i.e. 180.However,it will became additional cost if the aggregator is not entitled CENVAT Credit for the same. One should keep in the mind that if the driver is individual, HUF, Partnership firm or AOP and customer is business entity than customer needs to pay service tax.
The question arise is what if the aggregator is not physically present in India?
If the aggregator does not have a physical presence or does not have a representative for any purpose in the taxable territory, the aggregator shall appoint a person in the taxable territory for the purpose of paying service tax and such person shall be liable for paying service tax.”
Aggregators also has a right to issue invoices if the service provider authorizes him. As per Rule 4A of Service tax rules 1994, Every person providing taxable service or a person authorized by him in respect of taxable service provided by him can issue an invoice. So aggregator can issue an invoice.
Aggregator concept is not only limited to rent a cab service it also applicable to many online sources such as Flipkart, Snapdeal, Ola, Amazon, etc.
By Atul Rathod
CAclubindia
