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After RBI diktat, Uber cabs under the scanner of Services Tax Dept

New Delhi: After allegedly falling foul with RBI, the US-based transport app provider Uber Inc, which offers its services to around 1,200 cab operators in India's 10 top cities, has come under the scanner of

PTI [ Updated: October 12, 2014 16:46 IST ]
after rbi diktat uber cabs under the scanner of services
after rbi diktat uber cabs under the scanner of services tax dept

New Delhi: After allegedly falling foul with RBI, the US-based transport app provider Uber Inc, which offers its services to around 1,200 cab operators in India's 10 top cities, has come under the scanner of the Services Tax Department.

"We have sent a tax enquiry to Uber Inc. So far, they have not paid us a single penny in taxes. We have not sent them a demand notice as they don't have an office in the country, but are operating through their Netherlands arm," Mumbai Service Tax Commissioner SK Solanki told PTI.

When asked what is the quantum of the money they are in default of, Solanki said: "The department has not sent a demand notice to them but an enquiry, seeking clarifications.

"Their headquarters has informed us that some representative from their Netherlands office will meet us. We will issue them a demand notice after getting their response because we are not sure who is liable to pay the tax - Uber or the cabbies. But someone has to pay," he said.

Uber has become popular by offering luxury car rides for a little more than the regular fare.

The service tax notice to Uber makes it the first such demand to a foreign service provider in the e-commerce space in the country.

The San Francisco-based Uber Inc claims to be the world's largest transport app service provider by online aggregation of luxury cab operators, and has been under legal and regulatory lens in almost all the markets it operates in like the home market US, Germany, Britain, Poland, Brazil, Korea, among others. It is present in over 200 cities globally.

In August this year, the Reserve Bank had reportedly asked it to stop receiving payments with single-factor authentication from October 31, which would effectively mean that it will have to shut shop by the end of the month here.

When told that Uber claims it is not in default, Solanki said: "I don't understand how they are different from any other taxi operator like Meru, TabCab etc who all pay service tax. We are very sure that either Uber pay us the tax or cabbies do so. But getting it from some 1,200 cabbies individually is not easy."

When contacted for response, Uber communications head for APAC Region, Evelyn Tay in an email told PTI: "Uber complies with all applicable tax laws, and pays the relevant tax in every territory it operates in. All payments on the Uber system are cashless and fully traceable in an industry that has been notoriously cash-based for years."

The privately held company, set up in March 2009 by Travis Kalanick (chief executive) and Garrett Camp, has Goldman Sachs and Google Ventures among others as investors and offers vehicles for hire, ride-sharing through its app.

Interestingly, despite being an online platform, the company website does not have any contact point for the media, except an email id to reach out to their legal team.

To a query on whether the company has received a tax notice/enquiry from the service tax department here, Tay merely said: "Uber has no new updates/information to offer. We will keep you posted when there's more to share."

Her email said: "Across 10 cities in the country, it employs many local employees, in addition to empowering thousands of driver partners to become small business owners, earning a good living through the Uber platform."

It may be recalled that the Reserve Bank had reportedly raised "security issues and risk mitigation measures related to card not present (CNP) transactions' circular, which mandates a 'two-factor authentication' where cards are not present.

In case of Uber, the RBI also believes that it results in foreign exchange outgo as payments are made not in rupee.

According to experts, Uber was using a loophole in the RBI rules about credit card payments, which has allowed it to receive payment transactions with foreign exchange outflow to be exempt from the authentication requirement.

The payment flows into Uber's bank outside the country, and then Uber sends the payment back to the taxi driver here, even though the receipt is issued on behalf of the local taxi driver.

The RBI notice came after rival cab operators charged Uber with alleged violation of Foreign Exchange Management Act norms. Following this, the company extended its services to lower-end cars at cheaper rates as well.

Uber users register their credit card details with it, which uses it to charge for rides. Payment is done by credit card without the need for cumbersome two-factor authentication, which requires users to key in a PIN as it operates through an overseas payment gateway.

Cabbies and owners enter into tie-ups with Uber, for which it charges a 20 per cent commission.

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