In a major relief to local and home service startups, the government has brought down the goods and services tax (GST) rates to 5% from 18%, as per the recommendations by the 25th GST council meeting.
Startups like UrbanClap, Housejoy and Quikr, among others had communicated to the government saying charging an 18% GST rate for these services was detrimental to their business and was giving undue advantage to offline players who almost escaped the tax net due to the nature of unorganised state they operate in.
Prior to the latest recommendations, internet based companies offering housekeeping, salon and other such services needed to pay GST at 18% if their turnover was Rs 20 lakh or more in a year.
Startups in the space said their actual revenue is the commission they charge, since they are a marketplace, and not the full fees earned by professionals like carpenters, electricians for their services. Keeping an 18% GST on every order was resulting into users placing less order via these platforms as offline counterparts seemed a cheaper option.
Varun Khaitan, co-founder, UrbanClap said “We are thankful to the government for taking note of our representations and devising a fair tax regime. The idea was to ensure that there is offline-online parity in the tax structure for housekeeping services. The revised rate will help us, and other startups in the sector, to scale faster”.