Aggregator of Service – now aggregator of Service Tax

The trend of online and mobile shopping has been changing our lives in a big way.  With the use of websites and mobile apps,  one can now buy almost everything from a pin to a plane from anywhere in the world.  The greatest beneficiaries of e-Commerce have been the consumer products segment and some service sectors such as the cab travel sector.


Under Indian Indirect Tax laws, state governments collect Value Added Tax (VAT) on sale of goods (such as consumer products) and the Central Government collects Service Tax on services (such as cab services).

With e-Commerce and the marketplace setup created by e-Commerce platform owners, the latter act as the connecting point for vendors and customers. Therefore, in most transactions conducted on an e-Commerce platform, the retail customer does not have a preference regarding the seller of products or provider of services. What the customer relies on is generally the brand value of the platform owner/operator, commonly known as “aggregators,” and places his/her request at the price agreed on with the aggregator.

There are several aggregators operating in services in India, and one of the most prominent of these being the cab service segment.  Typical business models of such apps could be:

  • The aggregator develops a technology solution (application or app), which is used by “riders” to avail services from transportation operators registered on the app. The aggregator acts as an intermediary by bringing together the transportation operator and the rider through the app.
  • The contract for transportation services is between the transportation operator and the rider. While the aggregator does not provide services to riders, the transportation operator earns the fare for transportation services provided to the rider and pays a fee to the aggregator for sourcing the rider.
  • The aggregator usually arranges for fares to be centrally collected from the riders and periodically pays this to the respective transportation operator after deducting its fee.

In most cases, Indirect Tax is to be deposited in the Government’s treasury by the actual seller/service provider. In the e-Commerce model, several sellers or service providers deliver goods and services through a common platform.  The process of reaching out to them to press for registration and collection of tax is cumbersome for the regulators, and is fraught with the risk of failure. There may be a possibility of tracking actual sellers with regard to transactions in goods (since their movements are traceable), but the challenge lies in taxing services provided on platforms.

Taxing aggregators

In the Finance Bill, 2015, the Central Government has taken the  lead in formulating a new mechanism to collect Service Tax on services provided through aggregator models.

Effective 1 March 2015, the Service Tax law has been amended to make aggregators responsible for depositing Service Tax on all services provided under their brand names. Aggregators have been defined as persons who own and manage web-based applications, which enables potential customers to connect with service providers providing services under the aggregators’ brands or trade names.

In the business model mentioned above, it is clear that in most cases, owners of such apps are merely intermediaries. The introduction of the aggregator concept will now cover app owners as persons who are liable to pay Service Tax on passenger transport services provided by transport operators (who are the actual service providers).


With this change in Service Tax rules, a person other than a service provider or receiver has been made liable to pay Service Tax for the first time in recent times. By assessing the aggregator, the Government should be able to recover Service Tax on services provided by various service providers through a common platform.

It is interesting to note that the definition of an aggregator has been widened to include cases when the aggregator is outside India. In such cases, the representative of aggregators or any person appointed by them will be liable to Service Tax. This is to bring about parity between aggregators operating in India and those operating abroad. However, will the Government actually be able to enforce these regulations on aggregators located outside India? It will be interesting to see how this works if an aggregator chooses not to pay Service Tax.

This change is likely to have a negative impact on vendors providing services under such aggregators’ brand names. Now that liability to pay Service Tax has shifted from the vendor to the aggregator, the Cenvat Credit accumulated by a vendor on expenses will remain unutilized. Vendors will have no option but to absorb the cost of Service Tax charged their expenses, since no refund of such credit will be allowed.

Aggregators will now have to maintain proper records of their own Service Tax liability (on charges recovered from vendors) with the liability resting on them for the service providers. The manner in which Service Tax liability should be reported in the returns of aggregators and service vendors should also be thought through. The Government should release clear guidelines regarding how aggregators will be assessed and how they are expected to maintain records.


Aggregators will have to start collecting Service Tax if they are not already levying it, over and above amounts charged to customers. Given that these changes have been effective from 1 March 2015, Service Tax liability for earlier periods will continue to remain with service providers providing services under different platforms. Moreover,  we will have to wait and watch if similar provisions are continued in the Goods and Service Tax regulations once it these are rolled out.

Pratik Sampat, Senior Manager, IndirectTax has also contributed to this article.

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7 thoughts on “Aggregator of Service – now aggregator of Service Tax

  1. Dear Aravind,

    As mentioned in the write up, now the liability to deposit service tax has been cast upon the aggregator under whose brand the services are provided. Thus, while the service is still provided by the actual service provider, the liability to deposit service tax on such service is with a person other than service provider.

    Rule 4A of the Service Tax Rules, 1994 requires a service provider to raise an invoice mentioning the specified details. The said rule enables the service provider to authorise any other person to issue an invoice. In the case where the service is provided under the brand name of the Aggregator, the service provider can therefore authorise the aggregator to issue the invoice on his/ her behalf.

    Thus, in our view, while the service is provided by the actual service provider, the Aggregator can collect service tax from customer (under his registration number) for services provided under its brand name.

    Hope our response was adequate to resolve your query. For more details, please get in touch with :

    Divyesh Lapsiwala (Partner) at or Pratik Sampat (Senior Manager) at

    Thank you.

  2. Hi Divyesh,

    From the above article and the explanation, I gather that aggregator is liable to pay ST on the gross value of the transaction.. right?

    And this ST outflow can be offset by the Input received from the service provider invoice. However how would the ST liability be managed in case the service provider is not liable to pay ST (given that its revenue may be less than the required limit)??

  3. Dear Sir,

    Kindly guide us (company) in this case to save maximum on tax paying:
    A Private Limited company providing “Renting Bike & Renting Four Wheelers” (not cabs) to customers (riders/drivers of vehicle) via website booking only. The company does not own any vehicles of their own, company only aggregates the licensed renters (many renters) who are the owners of the many vehicles (each renter has many owned vehicles). The company charges commission of say example 20% for facilitating business of renters on their website (online platform) and the company is incorporated in this financial year.
    1. How is the tax applied on such case? How much % of tax paid by renter and how much by aggregating company?
    2. What if the company on their website takes only 20% (company’s commission) of Total rent amount as “Booking Amount” to confirm vehicle availability on committed dates. How is the tax applied in such case?
    3. What if the company on it’s website takes 100% rent amount as “Booking Amount” to confirm vehicle availability on committed dates. How is the tax applied in such case?
    4. The service tax to be reduced from the renter’s turnover (business on website) or company’s share of commission? or any % of sharing?
    Your article is nicely return and we would appreciate your answer on the above queries. thank you.

  4. While providing taxi / rent a cab services are liable to service tax, transfer of right to use goods (deemed to be sale under article 366 (29A) of the Constitution of India has been excluded from the definition of ‘service’ in the service tax legislation.

    Thus, before determining who is supposed to deposit how much service tax, it is advisable to analyse whether the underlying activity being carried out by the Private Limited Company is liable to service tax or VAT or both. In case the activity is construed as service, it also needs to be analysed (with the introduction of ‘aggregator concept’) under whose brand name is the renting activity being done.

    In case the activity qualify as taxable services and the Company is considered to be an aggregator, the Company shall be liable to deposit service tax on the entire rental charged to the customer. Further, service tax is also likely to apply on the commission charged by the Company.

  5. Dear Sir,

    Your article is really informative. thank you so much.
    Sir, whether incentives/rewards given to the actual service providers by the aggregator is liable for service tax? This incentive is given for the meeting the various targets set by the aggregator. Eg OLA drivers are to be given some sum for every trip made.

    Awaiting your response.

    Thanks in advance.


  6. Dear Sir,
    Very informative, however I have another query.
    In case we have an aggregator model where we have a mobile application where a shipper can find a truck of his need and hires a truck through my portal where the Consignment Note of LR is issued by the transporter will there be any service tax liability on the aggregator

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