E-commerce transactions on ‘aggregator’ platforms turn costly

March 01, 2015 06:05 pm | Updated 06:05 pm IST - New Delhi

E-commerce transactions through websites and mobile apps based on ‘aggregator model’, including for cab services and online shopping, may turn expensive as those providing such services under their own brand are being brought under the service tax net.

The Finance Bill has proposed changes in the Service Tax rules with respect to certain e—commerce transactions involving aggregator model, which may impact online aggregator taxi services like Uber and Ola Cabs.

There are also many online retail websites that follow ‘aggregator’ model. Under this model, an entity does not produce or warehouses any product itself, but collects or aggregates information on goods or services on one single platform from several sources.

The aggregator draws customers to its platform and allows them an easy comparison of prices and specifications of product or service offered by several sellers.

As per the Finance Bill 2015, presented by Finance Minister Arun Jaitley in Parliament, “In respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India, is being made liable to pay Service Tax if the service is so provided using the brand name of the aggregator in any manner.

“If an aggregator does not have any presence, including that by way of a representative, in such a case any agent appointed by the aggregator shall pay the tax on behalf of the aggregator.”

In this regard, appropriate amendments have been made to the Service Tax Rules, 1994, it said, while adding that the change has come into effect immediately, that is with effect from today.

As a result, such services will turn expensive once the aggregators decide to pass on the service tax levy to the consumers.

According to leading law firm Khaitan & Company, “In respect of certain e—commerce service transactions, the person liable to pay Service tax has now been clearly specified.”

For services offered under aggregator model, the aggregator, or its representative office in India would be now made “liable to pay Service tax if the service is provided by using the brand name of the aggregator in any manner.” If an aggregator does not have any presence, then its agent will have to pay the tax, the law firm clarified.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.