GST may double Ola, Uber drivers' lease outgo, business may become unviable

Tax on lease under GST regime to rise to 35-43%, from 14.5% currently

Cab aggregators such as Ola and Uber, as well as their drivers might have to pay twice the amount of tax on leasing under the GST regime, making the whole business model unsustainable, claim companies. According to industry experts, lease rentals could rise from 14.5 per cent at present to anywhere between 29 per cent and 43 per cent.

According to Orix India, a leasing finance company wholly owned by Orix Japan, as the tax on services will increase from 15 per cent to 18 per cent, there will be a direct increase in the cost for establishments that give transportation facility to their employees or rented cars to their management.

“The cost of cars that were leased during pre-GST and the EMI being paid post-GST will become more expensive. The cost of EMIs on such cars will go up as much as up to 30 per cent. It is expected that a consumer who was paying an EMI of Rs 30,000 pre-GST will have to pay an EMI of Rs 45,000 post-GST on the exact same car,” the firm said.

App-based cab aggregators are worried that while their business models would be on the verge of becoming unsustainable, drivers would have a hard time paying for their leases.

“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. At present, these driver-partners pay 14.5 per cent value added tax (VAT). In the proposed GST regime, they will have to bear GST rates of 29 per cent to 43 per cent on the cars already leased, as an outcome of double taxation on existing leases. This will have an adverse impact on their livelihoods, setting them back over Rs 1 lakh for the remaining period of lease, making it unviable to sustain their business,” said Shalabh Seth, CEO, Ola Fleet Technologies, a wholly owned subsidiary of Ola said.

Experts said that the overall sentiment in leasing industry is very low because of GST and no provisions for double taxations. “Orix India is expecting its Rs 75 crore leasing business to go down Rs 15 crore to Rs 20 crore post-GST because of chaos in the market,” the company said.

They added that the chances of default on payments are set to rise. “These chauffeurs will have to bear the cost of increase in EMI. The chances of default payments might also go up in such cases,” the company said.