Value-added tax at the rate of 5 per cent on ride sharing service will be applicable only on the service providing companies’ share in the fare, according to the National Board of Revenue.
The fares of ride-sharing services will increase to some extent as the ride-sharing companies will estimate the total fare including the VAT on their income from the service, said NBR officials.
VAT wing of the NBR on Sunday issued an explanation in this connection saying that ride-sharing companies would have to pay the VAT before filing VAT returns every month.
The NBR also said that income of drivers of the ride-sharing service would remain VAT exempted as per the VAT law.
According to the VAT and Supplementary Duty Act-2012, driving service of all types of vehicles is considered as personal service which is VAT-free.
Officials of the revenue board said that they issued the explanation to remove confusion of the field-level officials over collection of VAT from the sector.
The NBR’s field-level VAT officials were confused over applicability of VAT on the total amount of fare, they said.
The NBR, for the first time in the last fiscal year 2028-2019, imposed 5 per cent VAT on the service following a boom of ride-sharing service in the country.
Currently, a number of local and multinational ride-sharing companies such as Uber, Patho, OBHAI and Shohoz are providing transportation services connecting registered drivers of motorcycle, motor car and CNG with riders using online platforms and mobile applications.
Motor vehicle owners themselves or by appointing drivers will provide the services after registering their vehicles with the ride-sharing companies.
The companies take up to 25 per cent of the total fare as commission and the owners or drivers get the remaining portion of the fare.
According to NBR explanation, ride-sharing companies will be charging VAT inclusive fares.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Tax