Finance Ministry Arun Jaitley’s move to widen the service tax base by including radio taxi operators in its net will hit established companies such as Meru Cabs while leaving more nimbler rivals such as Ola Cabs and TaxiForSure unscathed.
Mr. Jaitley, on Thursday, pointed out that if the service tax base was to be broadened, it was necessary to prune the negative list and exemptions.
“A tax is being proposed on the service provided by radio-taxis to place them on a par with rent-a-cab service. These new levies will come into effect from a date to be notified after the passing of the Finance Bill,” he said.
Meru Cabs, one of the oldest radio taxi services, has slammed the move, saying that an increased tax burden would impact overall viability of the industry.
“The increased tax burden will lead to about Rs.2-3 a km increase in fare, and will impact demand in the medium-term. The industry is struggling to make a decent return on capital employed. We hope that Finance Ministry officials will reconsider this keeping the consumer burden in mind,” said a company spokesperson.
However, it will not affect online players such as Uber or Ola Cabs.
“We already remit service tax since we qualify as a service provider for customer sby connecting cabs to them. This announcement doesn’t affect our pricing or services in any way,” said a Ola Cabs spokesperson.
