Transportation plays a dominant role in strengthening the economy of a nation. It involves carrying the goods from a place and moving it to another country via sea, road or by air. The Tax Filing and VAT Accounting departments, of course, keep an eye on all kinds of transported goods and they get to cross-check the products to ensure under whether or not the products fall under the exempted category. In general, the VAT Implementation Services in UAE has classified the transport service rules with respect to taxations under the following three categories:
- Standard Rate (5%).
- Zero Rate.
Implications of VAT/GST on Transport Services:
- The domestic goods transportation is the kind of service which deals with transporting the goods as well as passengers for any place in the UAE or KSA to another place which is located in KSA. The domestic transportation has been classified under the taxable supply of services which is also subjected to paying VAT at the prescribed rate.
- The transportation of passengers as well as the goods from a member state of GCC to another place which also comes under the GCC rules, is considered to be zero-rated.
- The third parties, including the travel agents and the rest of the intermediaries, the proper calculation and collection of GST and VAT is quite important for Tax Filing and VAT Accounting Under the light of the new rules recently implemented in the UAE and KSA, these rates will be calculated by taking into account the nature of the supplies. If these are zero-rated, no tax will be applied. If otherwise, then the rates will be applied as per the standard procedure.
- It is quite a normal scenario that happens while dealing with transportation. Passengers are often seen in the habit of cancelling their tickets. In this case, the travel agents cut of a faction from the refund amount and give the rest of the money to the passenger. In order to trace the nature of the charges cut by the agents, VAT Implementation Services in UAE has asked for the help from GAZT to assist the authorities in such matters.
- In the airline industry, there are such products which are sold absolutely duty-free. The factors such as the point of sale and the places where the supply will be made are going to be a great challenge in determining the VAT or the GST due to the difference in the rates.
Apart from this, there are companies which are involved in the transport business makes considerable usage of rented cars, buses, vans and even planes. Till now, the VAT and GST are being calculated on the basis of the supplied they carry. This methodology only speaks for the items of transportation without taking into account the depreciation cost incurred on the vehicle. Now, such tax reforms are needed which not only cover the items, but also the transport vehicles.