Ride-hailing firms to flag SaaS services GST worries to CBIC
Ride-hailing platforms, including
Ola
,
Uber
, and
Rapido
, are set to make a fresh set of representations to the
Central Board of Indirect Taxes and Customs
(CBIC) on the contentious issue of applicability of goods and services tax (GST) on services offered under the SaaS model.
Under the SaaS model, platforms charge a fixed subscription fee to gig workers instead of a commission.
Companies are expected to flag ambiguities arising from inconsistent tax treatment of the SaaS model following divergent rulings from the Karnataka Authority for Advance Ruling (AAR), said people in the know. They alleged that the
Karnataka AAR
's decision is distorting competitive parity in the sector.
While the Karnataka AAR allowed ONDC-affiliated Namma Yatri to operate without levying GST, it held that Uber and Rapido remain liable to pay the tax under the same model.
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Rapido operates the
subscription model
for its auto-rickshaw and four-wheeler ride-hailing offerings, while Uber has deployed this model for the three-wheeler ride-hailing. Ola Consumer, which started by deploying the subscription model for autorickshaws, earlier this month
expanded it to four-wheeler taxi services
as well.
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'Some companies have taken a 'no-tax position' on the subscription model, and this creates inequality for tax-paying players who charge commission," said a senior executive at one of the
ride-hailing firms
. "The ride-hailing space is a price sensitive sector, and the fares offered to riders by those operating on the subscription model end up being significantly lower…this puts certain companies at a competitive disadvantage,'
The move to launch subscription-based plans wherein platforms charge a fixed daily or weekly fee to driver partners on their platforms for an unlimited number of rides helps companies potentially bypass the 5% GST applicable on rides facilitated by them, people said.
The 5% GST is applicable under Section 9 (5) of Central GST Act, which mandates ecommerce firms such as ride-hailing platforms, food-delivery companies, and online retailers to collect and pay tax on behalf of service providers listed on their apps. These include drivers, restaurants and e-marketplace sellers.
Uber, Ola and Rapido did not respond to ET's queries.
The fresh representations come in the backdrop of a recent Karnataka High Court order that asked CBIC to engage stakeholders and clarify its stand on the matter.
On companies rolling out subscription model to bypass the 5% GST, tax experts said it could also lead to potential disputes between operators and tax authorities amid lack of clarity on whether a September 2023 advance tax ruling, which held that Namma Yatri need not collect and pay GST, would apply to other platforms as well.
In July 2024, however, the
Karnataka AAR ruled
that Rapido was liable to pay GST for its cab services, and later in November issued a similar ruling saying Uber would also be liable to pay tax for services launched on the subscription model.
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Ride-hailing platforms, including Ola , Uber , and Rapido , are set to make a fresh set of representations to the Central Board of Indirect Taxes and Customs (CBIC) on the contentious issue of applicability of goods and services tax (GST) on services offered under the SaaS model. Under the SaaS model, platforms charge a fixed subscription fee to gig workers instead of a commission. Companies are expected to flag ambiguities arising from inconsistent tax treatment of the SaaS model following divergent rulings from the Karnataka Authority for Advance Ruling (AAR), said people in the know. They alleged that the Karnataka AAR 's decision is distorting competitive parity in the sector. While the Karnataka AAR allowed ONDC-affiliated Namma Yatri to operate without levying GST, it held that Uber and Rapido remain liable to pay the tax under the same model. Rapido operates the subscription model for its auto-rickshaw and four-wheeler ride-hailing offerings, while Uber has deployed this model for the three-wheeler ride-hailing. Ola Consumer, which started by deploying the subscription model for autorickshaws, earlier this month expanded it to four-wheeler taxi services as well. 'Some companies have taken a 'no-tax position' on the subscription model, and this creates inequality for tax-paying players who charge commission," said a senior executive at one of the ride-hailing firms . "The ride-hailing space is a price sensitive sector, and the fares offered to riders by those operating on the subscription model end up being significantly lower…this puts certain companies at a competitive disadvantage,' The move to launch subscription-based plans wherein platforms charge a fixed daily or weekly fee to driver partners on their platforms for an unlimited number of rides helps companies potentially bypass the 5% GST applicable on rides facilitated by them, people said. The 5% GST is applicable under Section 9 (5) of Central GST Act, which mandates ecommerce firms such as ride-hailing platforms, food-delivery companies, and online retailers to collect and pay tax on behalf of service providers listed on their apps. These include drivers, restaurants and e-marketplace sellers. Uber, Ola and Rapido did not respond to ET's queries. The fresh representations come in the backdrop of a recent Karnataka High Court order that asked CBIC to engage stakeholders and clarify its stand on the matter. On companies rolling out subscription model to bypass the 5% GST, tax experts said it could also lead to potential disputes between operators and tax authorities amid lack of clarity on whether a September 2023 advance tax ruling, which held that Namma Yatri need not collect and pay GST, would apply to other platforms as well. In July 2024, however, the Karnataka AAR ruled that Rapido was liable to pay GST for its cab services, and later in November issued a similar ruling saying Uber would also be liable to pay tax for services launched on the subscription model.
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