The GST Council in its last meeting exempted home service providers having below `20-lakh turnover from GST registration.
By Anushree Bhattacharya and Sumit Jha
Despite the exemption given to small ‘home service’ providers from GST registration, e-commerce companies operating in this space say the GST Council hasn’t done enough to correct their tax disadvantages. The exemption is for an individual who is either an electrician, plumber, carpenter or cleaner, etc, using services of these portals to reach his customers. To put the partial relief in perspective, the exemption is not applicable to vendors on e-commerce portals such as Amazon and Flipkart where vendors below the threshold of Rs 20-lakh annual turnover too are required to register on the GST portal. After several representations to the government, the GST Council in its last meeting exempted home service providers having below Rs 20-lakh turnover from GST registration, effectively providing relief to companies such as UrbanClap, Housejoy and Quikr, which serve as platforms for only service deliveries. While the latest decision of the council allows semi-skilled professionals to register on the portals such as UrbanClap without the extra hassle of GST registration, the GST, along with services charges, they need to pay to portals makes this route more expensive to customers.
These portals had been expecting that the government notification would correct the differential taxation and treat them like online cab aggregators such as Uber and Ola which are charged a flat rate of 5% GST without any input tax credit. Currently, an offline home service provider could charge, say, Rs 80 for a particular job and the customer doesn’t have to pay any GST on it. However, if the customer gets the same service at the same price from an e-commerce operator, he would need to pay an extra Rs 20 as commission to the portal and an 18% GST thereupon, inflating the price of his service to the customer to `118, roughly 50% higher than the cost of offline service.
“While the government has taken the step in the right direction to exempt service providers who earn less than Rs 20 lakh per annum from getting a GST registration number, the disparity between the offline and online worlds continue. E-commerce companies like UrbanClap, which aggregate services like plumbing, electricians, etc, are required to collect the 18% GST at source and deposit it on behalf of the service professionals, when the same service professional is exempted in the offline world,” Abhiraj Bhal, co-founder of UrbanClap, said. He added that a differential taxation regime is in the long run a “lose-lose for everyone – customers, service professionals, and the government.”
Problem still persists for these online players, as tracking the annual turnover of an individual service provider would be a tricky task. “Even as service providers with less than Rs 20 lakh of annual income are no longer required to have registration, the problem is how will one track in case of individual operators. There is still some clarity in case of third party vendors who run shops, and thus will have a higher income. At the same time, the larger issue of differential taxation remains unsolved,” said Saran Chatterjee, CEO of Housejoy. However, tax experts said the exemption from registration of service providers helps the portals in competing with their offline rivals. “Suppliers on e-commerce platform have also been extended the benefit of Rs 20 lakh annual threshold, which provides them a level playing field vis a vis others,” Pratik Jain, leader of indirect tax at PwC, said.