Kathmandu. The government has introduced a new system related to ride-sharing service value added tax (VAT) on services like Pathao and InDrive. The Inland Revenue Department (IRD) has issued a public notice stating that as per the amendment made through the Finance Act, 2083, the people who provide services by joining ride-sharing platforms will now have to pay tax at the rate of 5 percent.
According to the department, ride-sharing platforms will have to charge 5 percent value added tax at the time of transaction from the riders providing transportation and transportation services through their app.
The Department has also issued new procedural guidelines to make this system simple and transparent. Earlier, the government had taken this step to remove the confusion in the tax system of such services and bring them under the tax net.
According to the new rules, ride-sharing platforms will have to submit the tax collected on behalf of the rider and its details to the concerned revenue office by the 25th of the end of every month.
It has been made mandatory for the platform to issue a tax invoice while collecting tax on behalf of the rider. However, the amount so collected and the issued invoice will not be considered as the own income of the platform. Also, the platform will not get the benefit of tax deduction on such tax collected on behalf of the rider.
In addition to this, ride-sharing platforms will have to collect VAT at the prevailing rate of 13 percent in case of commission or other service charges taken from riders. The government has also set some conditions for the riders providing the service.
From now on, every rider joining the platform will have to mandatorily have a Permanent Account Number (PAN). However, the department has clarified that it is not mandatory for these riders to register themselves under the Value Added Tax (VAT).
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