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All about aggregator

The Finance Bill, 2015 has sought the levy of service tax on e-commerce transactions under aggregator model effective from March 01, 2015.

In the budget 2015, for the first time, a person other than the service provider or the service receiver has been saddled with the liability to pay tax. An aggregator has been made a person liable to pay service tax in case service is provided under the aggregator model; if the service is provided using the brand name or trade name of aggregator in any manner.

Accordingly the definition of aggregator is defined under Rule 2(1) (aa) in Service Tax Rules, 1994 to mean an:

“Aggregator means a person, who owns and manages a Web-based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator”. The term brand name or trade is well defined accordingly in the Service Tax Rules.

A simple example can be taken to understand the provision. The taxi services are directly provided by the taxi driver to the customer. However, the customer receives the service under the brand name of the PQR web site. Hence, in such cases, the PQR is regarded as the aggregator for the purpose of service tax.

The liability to discharge the service tax is on the aggregator under reverse charge. Hence, any e-commerce transaction under aggregator model is taxable. The notification pertaining to reverse charge mechanism (Notification No. 30/2012-ST) got suitable amendment by including the aggregators as the person liable to discharge service tax. Further, Rule 2(1) (d) of the Service tax rules is also amended accordingly by inserting sub-clause (AAA) describing the person liable for payment of service tax:


Location of the Aggregator/Agent

Person liable to pay service tax


If the aggregator located in India

The aggregator is liable to pay service tax. (Reverse charge mechanism)


If the aggregator does not have the physical presence in the taxable territory

The person representing the aggregator is liable.


If the aggregator does not either have physical presence or representative in the taxable territory

The aggregator shall appoint a person for the person of paying service tax.

Even if such aggregator appoints just a liaison or country head there officials will have to file service tax returns on the company’s behalf.

The increase in service tax rate is bound to impact the radio-cab industry and it is understood that the new rules for the same will bring others (foreign players) and the service provider on a level-playing field. (A situation where everyone has the same opportunity).

The new service tax rate will apply to online aggregators, deal sites and classifieds players such as Flipkaart, Amazon, Quikr, Zomato, FoodPanda, Olx, Housing, Mydala, Cashkaro and Stayzilla.

Tax under reverse charge Under Notification No. 30/2012-ST as amended by Notification 7/2015-ST dated 1.3.2015

Service Tax for services provided or agreed to be provided by a person involving an aggregator in any manner shall be payable under reverse charge mechanism. 100% Sof Service Tax shall be payable by the aggregator.

----Manasa Be


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(Student CA Final )
Category Service Tax   Report

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