30th September, 2020

Home service startups to pay 18% GST, local business cheers

Startups offering home-services such as plumbers, carpenters and expert cleaners would now face the challenge of keeping them on their listed services. It is because these services would now attract a GST (Goods and Services Tax) of 18%.

Local business to get boost

Hiring these services through formal sector will become less competitive after higher GST. This is because hiring a local person for these services will now be preferred as the local rivals usually get paid in cash.

Service providers like UrbanClap, Quikr and Housejoy are a few known startups that provide home services via digital platform making each and every service visible.

It is clear that the fear of hiring a service via digital platforms would encourage the informal services sector.

No turnover limit

Another blow these service-providers is that they would be taxed at 18% irrespective of their turnover limits. The home service sector via digital platform is not considering even the GST’s exempted threshold of Rs 20 lakh.

If the service is hired via e-platform, the service will face tax.

In a notification in August, it was made clear that irrespective of the provider’s turnover, services via online platform would be liable to tax.

Collection by platform

The notification also said that the tax is to be collected and paid by the platform.

The idea is that since these service providers are becoming a part of the formal economy, they have to file returns and maintain records.

Industry feels cheated

The industry’s reaction is that government is discriminating between the two delivery models. And it stands in government’s way to digitization and formalizing the economy.