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Uber slows down on driver sign amidst service tax and RBI investigations
November, 18th 2014

According to sources, Uber has decided to go slow on new driver additions especially in Mumbai, from where it has been served a showcause notice on its service tax liabilities. The company adds about 30% new drivers in its fleet every month.

"We are going slow on getting new drivers on our platform this week at least and wait for this heat to come down," said an Uber India source on conditions of anonymity. However, the source clarified that the company has not completely stopped registering new drivers in India.

"The new promotional offers which were to come around Diwali for Uber users might also be delayed to avoid the limelight," said another official. Uber had been coming up with free ride offers for Indian users on occasions such as Raksha Bandhan and Mother's Day. Other cities such as Bangalore and Delhi also have not seen promotions as RBI's deadline of October 31 to comply with its guidelines on credit card authorisation nears.

Uber did not reply to a mail sent by ET seeking comments. Its Indian competitors, however, are making the most of the situation. While Ola is offering 100% cash back on first time recharges on Ola money wallets till October 31, TaxiForSure is having a promotional offer of .

`1 rides in cities such as Delhi. Other e-commerce companies such as Amazon, Flipkart and Snapdeal are expected to spend over .

`100 crore on marketing this Diwali to attract new customers. On the issue of service tax, Uber has passed the buck of tax liability to individual drivers, many of whom don't even have a service tax registration. "From all perspectives, this would be the only option that Uber has," said Vaibhav Parekh, partner at law firm Nishith Desai Associates. "Uber has done its job by passing driver details to the authorities, who are unlikely to pursue them." An Uber driver ET spoke to said that most drivers have a PAN card just for an ID proof, but do not pay any taxes. Most individual drivers attached with taxi operators earn between .

`30,00040,000 per month, leaving them outside of the bracket. "Service tax has to be paid by the drivers only if his income exceeds Rs 10 lakh annually. That is very unlikely to be the case for any taxi driver individually," said Jaspal Singh, cofounder of Valoriser Consultants, which provides market research services for transportation companies.

The Indian taxi market is pegged between $6 billion (. `36,000 crore) and $9 billion (. `54,000 crore), of which only 4%to 6% is organised. "We are not sure who is liable to pay the tax—Uber or the cabbies. But someone has to pay," Mumbai Service Tax Commissioner SK Solanki told agencies this week.

Meanwhile Indian entrepreneurs say that abiding by local laws should be mandatory if a company chooses to operate in India.

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