The National Board of Revenue (NBR) has issued a circular exempting ride-sharing passengers from paying Value Added Tax (VAT). Instead of charging ride-sharing passengers, the government will charge companies that offer the service 5 percent VAT and 1 percent tax at source.
This order will be treated effective from July 1 this year.
In the 2018-19 FY budget, the government imposed 5 percent VAT and 1 percent tax at source on ridesharing services. In the 2019-20 FY, there was a proposal to increase VAT to 7 percent, but this was never finalized.
NBR officials say their circular issued on Monday will provide relief to passengers.
“Ridesharing companies usually earn 20-25 percent commission from each ride. In some cases, they charge less than that. Therefore, the amount of VAT charged on the fare will finally be quite low,” said NBR first secretary for VAT policy Hasan Mohammad Tarek Rikabder.
In an elaboration of the circular, the NBR said: “Riders take a service charge from passengers while ridesharing companies get commission. As passengers are exempt from VAT in the VAT Law, the same policy will be followed for ridesharing services.”
The NBR says that companies will have to pay VAT to the government by using a specific submission form. According to the Bangladesh Road Transport Authority (BRTA), more than 25 companies including Uber, Pathao, Shohoz, Obihai and Pickme are operating in Dhaka.
From the very beginning, entrepreneurs have been vocal against the imposition of VAT and tax on this booming sector. They also wrote to the finance minister seeking VAT exemption.
In 2015, the BRTA took an initiative to regulate and register ridesharing companies. Although 16 ridesharing companies applied to the BRTA for registration, only 5 of them have got it so far.