Ola and Uber’s car leasing program to get into rough waters under GST

Though GST has been a welcome change for the commuters with the taxi fare bound to go south due to lower tax slab, the drivers will feel the pain for long run, and especially the ones with leased cars. Under the new taxation rules, the tax of car leasing has increased to 29-43% range, up from the 14.5% number earlier. It is expected to further impact the drivers with higher EMIs.

Shalabh Seth, CEO of Ola Fleet Technologies (a wholly owned subsidiary of Ola), said that “At Ola Fleet Technologies, we run a leasing program for tens of thousands of driver-partners who may not be able to afford buying a car of their own. Presently, these driver-partners pay 14.5 per cent VAT. In the proposed GST regime, they must 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”. Additionally, he said that “This will have an adverse impact on their livelihoods, setting them back by over INR1,00,000 for the remaining period of the lease, making it unviable to sustain their business”.

With the firms already squeezing the incentives paid to the drivers, it will be a double whammy for the leased car drivers with their monthly EMI set to become 1.5x or more.