The value added tax (VAT) on ride-sharing businesses will have to pay value added tax (VAT) by the mobile app-based companies only from their portion of service charges while the amount received by drivers or car owners will enjoy exemptions. The full amount of service charges received from passengers will not be VAT-able, according to a clarification of the National Board of Revenue (NBR).
NBR clarified that companies offering the service through mobile-apps would have to deposit VAT amounting to 5 percent of their cut of the fare. They also explained that, passengers and drivers of the ride-sharing services such as Uber, Pathao, Shohoz and others will be exempted from payment of the VAT.
At present, ridesharing service providers claim 18-20 percent of the fare for themselves.
In the budget for fiscal year (FY) 2019-20, the NBR kept 5.0 percent VAT on ride-sharing service unchanged as in the previous year under the new VAT and Supplementary Duty Act-2012.
Although the government had fixed 7.5 percent VAT in the proposed budget, it finally brought down the rate to 5.0 percent in the Finance Act-2019.
However, few companies claimed that they had been paying the VAT from their own pockets since June 2018, hence there will be no impact on consumers.
According to an estimate by the Policy Research Institute (PRI), the size of ride-share market in Dhaka is around Tk 22 billion a year.
Presently, cars, motorbikes, CNG auto-rickshaws and other motor vehicles are providing ride-sharing services in Dhaka, Chittagong and other major cities.
With Pathao and US-based Uber first to arrive in 2016, there are currently some 20 ride-sharing service providers such as Shohoz and Obhai in Dhaka, Chattogram and Sylhet providing about 40,000 rides daily.