Anomalies with the new GST tax regime seems to have affected many sectors and the startups offering online housekeeping services are one among them. Companies like UrbanClap, Housejoy and Quikr are badly affected since they have to charge 18% GST on the bills they raise on their customers and remit it to the treasury, according to a report in Economic Times.
Now, this is anomalous since these companies don’t retain the amounts they charge from their customers. They only retain their commission and pass on the rest to the service professionals they engage to execute the jobs, like electricians or carpenters or plumbers.
These startups have now taken up the issue with the government, pointing out that the very wording in the GST law appears to lead to different interpretations for those offering these services online and offline. The letter has been sent through the industry association Nasscom.
The companies claim that they have already made several representations to the government but to no avail. They have proposed a couple of alternatives to the authorities; either they are allowed to join the composition scheme, where a flat rate of GST of 1% can be charged; but it cannot be passed on to the customers and such firms cannot avail any set-offs also against taxes paid on inputs. This has been mainly done to help the small and micro industries and businesses who find it difficult to afford the infrastructure needed to maintain elaborate records and books and follow the various rules.
The other alternative suggested by these startups is to treat them on par with the offline service providers of the same services and charge them a flat 5% GST.
With the government’s avowed policy to promote startups, the UrbanClaps and Housejoys of the industry are in the hope that the government take a more favourable view of their case and take a positive decision. The matter may come up during the next GST Council meeting of states to be held on January 18.
From the government’s perspective, some experts point out that there is an apprehension that the concession, if granted, may be used as a route for money laundering and that is the reason the government is not too keen on relaxing the norms.