Startups such as UrbanClap, Quikr and Housejoy that provide digital platforms for service providers such as plumbers, carpenters and cleaners are now faced with the challenge of keeping them on board. That’s because these services now attract goods and services tax at 18%, making them uncompetitive in comparison with neighbourhood rivals who typically get jobs based on word of mouth and are usually paid in cash.
Most of these ‘micro-entrepreneurs’ have turnover way below the exempted threshold of Rs 20 lakh, but their services face tax as these are sourced via these e-platforms. The companies themselves can’t absorb the tax as that would make them unviable. “In light of the current major disparity between online and offline sectors, service providers are required to pay a staggering 18% GST if they operate in the online world, unlike the offline world where they do not need to pay the same,” said Housejoy CEO Saran Chatterjee.
A notification issued in August made it clear that irrespective of the provider’s turnover, services via online platforms would be liable to tax. This would have to be collected and paid by the platform. Also, with these service providers becoming part of the formal economy, they have to start filing returns and maintaining records, even if they’re below the threshold.
The industry has told the government that this discriminates between the two delivery models, much against the government’s own objective of formalising the economy and digitisation.
“A differential taxation regime is in the long run a lose-lose for everyone — customers, service professionals, and the government,” said UrbanClap cofounder Abhiraj Singh Bhal.
Source : https://economictimes.indiatimes.com/small-biz/policy-trends/home-services-startups-like-urbanclap-quikr-and-housejoy-reel-under-big-gst-shock/articleshow/61473689.cms