GST on Rides: Platforms and Unions Push for Review of SaaS Model Levy as CBIC Escalates Issue to GST Council
By: Admin
December 24, 2024
Categories: GST Recent News
4 Min Read
Ride-hailing platforms and drivers’ unions are urging the government to review the GST applied to the Software-as-a-Service (SaaS) model. The Central Board of Indirect Taxes & Customs (CBIC) has escalated the matter to the GST Council, delaying a final resolution.
GST Council Defers Decision
At its recent meeting, the GST Council postponed making a decision on this contentious issue. Finance Minister Nirmala Sitharaman acknowledged that the topic is still under study. Meanwhile, Karnataka’s Revenue Minister Krishna Byre Gowda, a GST Council member, noted discussions had taken place regarding GST levies on app-based rides and food delivery services. However, divergent opinions delayed a resolution, and further clarity is expected soon.
Industry Consultations and Concerns
In October, a three-member CBIC team led by Chairman SK Agarwal met with app-based transportation companies to review the GST implications of the SaaS model. The inputs collected were sent to the GST Council for further deliberation.
Industry players remain concerned about the uncertainty surrounding GST rates for different business models. They argue that the delays are hindering innovation and fresh investments in the sector.
AAR-KA Rulings and Industry Challenges
Uber India’s attempt to adopt a GST-light model in Bengaluru faced setbacks after the Karnataka Advance Ruling Authority (AAR-KA) ruled it fell within GST’s scope. Experts warn this could lead to retrospective taxation, potentially causing significant losses for ride-hailing platforms.
Namma Yatri, a SaaS-based model on the ONDC platform, has faced a different outcome. The AAR-KA ruled the platform must pay 18% GST only on the subscription fee it charges drivers. Drivers welcomed this decision, as it eliminated commissions, increasing their earnings by 20%.
However, this ruling could become irrelevant once the GST Council decides on how fares paid outside platforms should be taxed. Experts believe the council’s decision might require legislative changes.
Drivers and Unions Speak Out
Drivers’ unions, such as Tamil Nadu’s Urimai Kural Drivers Trade Union, oppose GST on subscription models. General Secretary Zahir Hussain argued that such policies would reduce drivers’ income and destabilize the gig economy. He emphasized that the SaaS model has allowed drivers to earn more by removing commission-based charges.
Conflicting Rulings Add Confusion
Confusion persists due to conflicting AAR-KA rulings. While the authority stated Rapido must pay GST on drivers’ services, earlier rulings for companies like Multi-Verse and Juspay Technologies exempted them from similar obligations.
Earlier this year, Uber filed a petition in the High Court seeking clarity on whether platforms offering passenger transportation services must bear GST liability under Section 9(5) of the CGST Act, 2017. This section mandates that ride-hailing platforms discharge GST on rides booked through their apps.
