Facts:
Uber Technologies Inc. (parent of Uber India) is a USA-based company that owns Uber App which provides lead generation services (online platform) to the various independent driver-partners. The driver partners use the platform of Uber to contract with various customers in India (the contract of transportation is between Driver-partners and customer directly). Following services are provided by Uber:—
| i. | Informing driver about customers who need transportation services; | |
| ii. | Connecting driver with the customers in real-time; | |
| iii. | Offer an option to collect fare digitally; & | |
| iv. | Making a payment to the driver for fare collected. |
For the abovementioned service, Uber charges a Service Fee from Driver Partner. Driver-partners are free to choose the timings and other conditions of the ride even whether to accept/reject the ride and therefore, the said drivers are neither the employee of Uber nor they are agents but are entering a transaction with Uber on principal to principal basis.
Uber India’s role in the complete process is only to provide cash collection and other support at a cost-plus markup basis to the Uber Group.
Issue involved:
Whether the payment made by Uber to various drivers located in India is liable to deduction of TDS u/s 194C? Whether remittances of payment by Uber India to Uber Technologies Inc. involve TDS deductions?
Relevant rules analysis:
| Condition to attract liability to deduct TDS u/s 194C | Analysis |
| The person responsible for payment | Uber India is only a remitter of money and not a payer or liable to pay money. |
| The disbursement to the driver should be in pursuance of any work done for Uber India | The payment made by Uber is not for the work done by the driver under any agreement. |
| There is a contract between Uber India and driver for the work done | The contract between Uber and driver is only to provide lead |
Conclusion:
Therefore, it can be held that Uber India is not liable to deduct TDS on payments made to drivers as well as its parent company in the USA. The same analogy would apply to all other e-commerce companies which are struggling with the withholding tax compliances in India. These principles would apply in all cases where the platform is only keeping a minuscule margin for providing the technical support however, every case has to settle by looking at who is the principal service provider.
Therefore to put such transaction of sale or provision of service into TDS ambit government has issue section 194-O when is reproduce below:
194-O. (1) Notwithstanding anything to the contrary contained in any of the provisions of Part B of this Chapter, where the sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of the amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of one percent of the gross amount of such sales or services or both.