. The government has introduced a new system related to Ride-Sharing Service Value Added Tax (VAT) on services like Pathao and InDrive. Issuing a public notice, the Inland Revenue Department (IRD) has made it mandatory for people to pay 5 percent tax as per the amendment made through the Finance Act, 2083.
According to the department, ride-sharing platforms will have to charge 5 percent value added tax (VAT) at the time of transaction from the person providing transportation and transportation service (rider) through their app. The Department has also issued new
procedural guidelines to make this system simple and transparent. Earlier, the government had taken this step to remove the confusion in the tax system of such services and bring them under the tax net.
According to the new rules, ride-sharing platforms will have to submit the tax collected on behalf of the rider and its details to the concerned revenue office within the 25th day of the end of each month.
The platform must compulsorily issue a tax invoice while collecting taxes on behalf of the rider. However, the amount so collected and the issued invoice will not be considered as the own income of the platform. Also, the platform will not get the benefit of tax deduction on such tax collected on behalf of the rider.
In addition, the ride-sharing platform will have to collect VAT at the prevailing rate of 13 percent in case of commission or other service charges taken from riders.
The government has also set some conditions for the riders providing the service.
henceforth, every rider who joins the platform must obtain a Permanent Account Number (PAN). However, the department has clarified that it is not mandatory for these riders to register themselves under the Value Added Tax (VAT).
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