Uber has switched to a cash-only model for auto rickshaw rides, joining competitors Namma Yatri, Rapido, and Ola, despite conflicting tax rulings by the Authority for Advanced Ruling (AAR) on whether ride aggregators must continue collecting Goods and Services Tax (GST) from passengers.
Since February 18, after it shifted to a subscription model for its auto drivers, Uber has stopped levying 5 per cent GST on auto rides, a tax it previously collected under its commission-based model.
The Karnataka bench of the AAR had ruled in November 2024 that Uber remains liable to collect and pay 5 per cent GST under the subscription model, even when it is not collecting any payment from passengers.
In contrast, a September 2023 ruling by the same bench on an application by Namma Yatri stated it was not required to collect GST from passengers, on the grounds that it only links drivers to passengers without being directly involved in the transport service.
Passengers now have to select ‘cash’ as their payment method and can use cash or UPI to pay the fare directly to auto drivers, who, in turn, pay a periodic fee to Uber for platform access under its subscription model.
As no GST is being levied on passengers, Uber is only generating a receipt and “not a tax invoice” after the completion of auto rides. The receipt is not a tax invoice as Uber claims the transactions between passengers and drivers occur independently of its platform.
Under Section 9(5) of the CGST Act, 2017, which stipulates GST rates for services provided through e-commerce operators, ride aggregators are charged 5 per cent GST for passenger services. As per government estimates, in 2023-24, GST revenue collected from passenger transport services under the section was Rs 1,545 crore.
The industry has reached out to tax authorities seeking a clarification on the 5 per cent levy under the subscription model for ride aggregation, The Indian Express has learnt.
By switching from commissions that consumed up to 30 per cent of daily earnings of auto drivers to fixed subscription fees, ride-hailing apps aim to attract more auto drivers onto their platforms under the subscription model.
Uber’s adoption of the model came after competitors Namma Yatri, Rapido, and Ola made the switch, fearing loss of market share in the three-wheeler space. While Namma Yatri and Rapido have also switched to subscription fees for cab drivers, both Ola and Uber, which have a firmer footing in the four-wheeler space, are yet to make the change for cabs.
Uber and Ola did not respond to requests for comment.
In its application before the Karnataka bench of AAR in November 2024, Uber India Systems Pvt Ltd argued that transportation services to passengers are not provided “through” it under the subscription model.
Rather, it is “only involved in connecting the supplier of services and consumer of the services with no further involvement (like a Just Dial, yellow pages, or business linking services). At the time, Uber had piloted a subscription-based plan for auto drivers in some cities, including Chennai and Kochi.
Under the subscription model, Uber provides an estimated fare based on its algorithm, which can be further negotiated by the driver and the passenger. The fare is also paid directly to the driver by the passenger, and Uber maintains no record of the final amount paid.
“As the Applicant has not collected any payment on behalf of the supplier, the question of collecting tax on behalf of the supplier does not arise”, Uber told the AAR.
The tax authority, on the other hand, observed that “there is no indication that the fare is an estimated fare” after scrutinising screenshots of the app. “Thus, the fare is also fixed by the app, and the same forms the basis for effecting the transaction between the rider and driver using the app,” it said.
It added that Uber “does not merely connect the rider with the driver but provides a platform for communication between the driver and rider without which the contract for providing the passenger transport service cannot be completed”.
The AAR also noted that an e-commerce operator need not collect the payment due to drivers for it to be held liable to collect and pay GST.
In the Namma Yatri (Juspay Technologies Pvt Ltd) case in 2023, which also connects auto drivers with passengers under the subscription model, the AAR, Karnataka, had said the app “doesn’t take responsibility for the operational and completion of the ride”.
It ruled that Namma Yatri does not carry tax liability as the “supply of services are not through the electronic commerce operator, but are independent”. The Namma Yatri app states the fare, provides safety support, and tracks the ride. Currently, the aggregator does not levy GST on auto rides.
“We would like to clarify that Namma Yatri functions as a platform facilitating direct transactions between riders and drivers. In accordance with our current operational model, GST applicability is determined accordingly,” a Namma Yatri spokesperson told The Indian Express.
In July 2024, the AAR, Karnataka, had also ruled on an application by Rapido (Roppen Transportation Services Pvt Ltd) seeking clarification on GST liability under the subscription model. On the same lines as the Uber case, it found Rapido liable to pay GST for both cabs and autos.
The AAR added that types of vehicles liable for GST under Section 9(5) include radio-taxis, motorcabs (including three-wheelers), and motorcycles.
“Currently, we are not charging any GST or tax. If this changes in the future, we will inform you accordingly,” Rapido told The Indian Express in response to a query on the ruling.
Rapido launched subscription-based plans for cab drivers in December 2023 and for auto drivers in February 2024.
On Rapido’s proposal to introduce a pay-per-use ride monitoring charge as an optional service for passengers, the AAR said it would be considered as a “security consulting service” and that 18 per cent GST would be levied on the same.
The subscription model gained traction after Namma Yatri launched it for auto drivers in September 2023. The app was developed by Juspay Technologies in collaboration with Bengaluru’s Auto Rickshaw Drivers’ Union (ARDU). Namma Yatri expanded the subscription model to cabs in April 2024.
Ola introduced such plans for auto drivers in cities like Delhi-NCR, Mumbai, Bengaluru, and Hyderabad in April 2024. In its terms and conditions, Ola reserves the right to levy a fee on passengers for using its software as a service (SaaS) platform “to enable introduction with the auto riders… which shall be subject to the tax applicable on it”. Like its competitors, Ola also does not levy the 5 per cent GST on auto rides.
Source- Indian Express
