GST at 18% has made startups such as UrbanClap, Quikr and Housejoy that provide digital platforms to plumbers, carpenters and cleaners, uncompetitive in comparison with neighborhood rivals who typically get jobs based on word of mouth and are usually paid in cash.

Taxation System Clearly Unfavorable

“The current taxation system with 18% GST is clearly unfavorable for all parties,” said service professionals and customers.

An industry expert said that “This is unfair and goes against the digital economy. It hits largely individual service providers and is making their service costlier.  Taxes should be levied only on providers who have a turnover above Rs 20 lakh.

Online-offline Disparity

The service providers are typically plumbers, air-conditioner mechanics or beauticians who join these platforms looking for a steady stream of work.

“Platforms like UrbanClap help service professionals become micro-entrepreneurs by multiplying their earnings” UrbanClap cofounder Abhiraj Singh Bhal said. “They also bring much-needed organization to this grey sector, with KYC (know-your-customer) norms, standards. One can argue that this is a case of online-offline disparity.”

Level-playing Field between Transactions

“There should be a level-playing field between online and offline transactions.” Said Pratik Jain, indirect tax leader, PwC

“People transacting on e-commerce platform should pay GST irrespective of their threshold, and this will act as a deterrent for individuals and small businesses to transact online, which surely cannot be government’s intention,” he said. “This needs to be looked into.”