GST on ride-hailing services: GST on Rides: Platforms, unions push for review of levy on SaaS model as CBIC escalates it to GST Council

Ride-hailing platforms and drivers’ unions are pushing for a review of the GST on the SaaS model as the Central Board of Indirect Taxes & Customs (CBIC) has lobbed the contentious subject to the GST Council, prolonging a decision.

The Council has deferred a decision at its Saturday meeting. The subject was being studied, finance minister Nirmala Sitharaman said in response to a query later. Revenue minister Krishna Byre Gowda, who represents Karnataka on the GST Council, said there had been some discussions about the GST levy on rides as well as food delivery booked on apps, but the subject evoked diverse views. A clarity will emerge in the coming days.

A three-member team led by CBIC chairman SK Agarwal heard app-based transportation firms on October 14 about the GST aspects on the SaaS model and later passed on its inputs to the Council for a wider discussion.

Companies have slammed on the brakes on innovation and fresh investments for want of clarity on the GST rates applicable under different business models on taxi and auto rides.

Uber India planned a GST-light business model for its app-based ride services in Bengaluru, but it hit a bump with the state’s authority on advance ruling (AAR-KA) deciding, last month, that the model it mooted very much fell within the realm of the GST.

“With passage of time, the SaaS operators fear retrospective taxation and consequential loss in business. Also, the ride-hailing platforms feel they are not even an ecommerce operator as they don’t fix charges and collect payment,” said Sadashiv Prasad, a chartered accountant who advises aggregators on the subject, said. “The delay in deciding on the issue creates uncertainty for further investments.”

Uber had planned to replicate Namma Yatri’s (JusPay Technologies) business model; Hosted on the ONDC platform, Yatri follows a SaaS model under which it collects a subscription fee from auto drivers for using its app to tap customers. The AAR-KA had, in a ruling last year, said the platform needs to pay 18% GST only on the subscription fee, a decision drivers cheered. The previous advance rulings would become redundant once the GST Council comes up with a decision on GST treatment to fare on rides passengers pay outside of platforms, Prasad said. A policy decision may even need legislative changes, he added.

Tamil Nadu-based Urimai Kural Drivers Trade Union general secretary Zahir Hussain said any GST on subscription models would hurt the earnings of drivers and roil the gig economy. The model has boosted the earnings of drivers by eliminating commission, helping in a 20% jump in the number of drivers.

Namma Yatri has stated that it does not have control over the ride as its app’s purpose ends with connecting a driver with the user. It neither fixes the fare nor plays a role in its collection. It only collects a fee from subscribers (read drivers) of its technology service) and pays a GST on the same.

The confusion arose from an AAR-KA ruling that said Rapido must pay GST on services provided by taxi drivers using its app, treating the driver’s services as those of Rapido in contrast to an earlier ruling where companies like Multi-Verse and Juspay Technologies were not held liable to pay GST on such transactions.

Uber moved the high court early this year, seeking clarity on Section 9(5) of the CGST Act, 2017 and whether ecommerce operators offering passenger transportation services must pay GST under the provision. Section 9(5) of the CGST law requires app-based ride-hailing services to discharge the GST liability arising from rides booked on the platform.