Sindh govt imposes 5% sales tax on ride-hailing services

Argument for provision of tax advantage has no force, states SRB

KARACHI: The Sindh government has imposed a reduced rate of Sindh sales tax on the services rendered by cab aggregators, also known as ride-hailing services. In a statement issued by the Sindh Revenue Board on Sunday to clarify the confusion, the board maintained that the services would have to pay 5% tax and not 13% as was being rumoured.

In the Sindh Budget for 2019-20, the services provided or rendered by cab aggregators and including the service of the cab drivers, also known as cab services, rent-a-car services and taxi services, using the online platform of cab aggregators have been declared a taxable service with a reduced rate of Sindh sales tax rate of 5% on the total component which include both, the component of the cab aggregators and the component of the drivers.

The statement observes that rent-a-car services and vehicle renting services, which include the radio cab service such as the metro cab, white cab and others, were already paying 10% Sindh sales tax on their services. Although the services of the cab aggregators competes 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. The reduced tax rate of 5% levied on their taxi services based on an online market platform still provides a tax advantage to the service providers.

The statement further states that the argument put forward that tax advantage should be provided on the grounds that it provides employment to the general public holds no force. The goods and services of every manufacturer or producer or service provider generate employments but they too pay taxes. Ride-hailing services and the cab services based on their online market platform pay sales tax, service tax, value-added tax (VAT) on the total price at the respective standard rates, which are higher than Sindh's standard sales tax rate of 13%, in India, UK, the EU countries, Australia and several other countries.

The tax will be effective from July 1, 2019.