GST on Rapido, Bharat Taxi Subscription Model Could Hurt Driver Earnings, Demand

Extending Goods and Services Tax (GST) liability to subscription-based ride-hailing platforms like Rapido and Bharat Taxi could result in lesser driver earnings, discourage driver participation and weaken passenger demand, according to a report by policy think tank Esya Centre. The report is based on a survey of more than 2,100 drivers and passengers across 13 cities and examines subscription or software-as-a-service (SaaS) models used by platforms where drivers pay a fixed subscription fee to access customers and negotiate fares directly with passengers, PTI reported.

It contrasts this with commission-based aggregators such as Uber and Ola, where platforms typically determine fares, collect payments and deduct a commission before transferring the balance to drivers.

Under Section 9(5) of the Central Goods and Services Tax (CGST) Act, GST liability for certain notified passenger transport services supplied through e-commerce operators rests with the platform rather than the service provider.

The report argues that applying this provision to subscription-based platforms presents practical challenges because these platforms neither fix fares nor collect payments from passengers.

It noted that while drivers are generally liable for GST as service providers, most do not cross the annual registration threshold of Rs 20 lakh.

Passenger transport services were brought under Section 9(5) through a notification issued in 2017, primarily to cover commission-based aggregators where platforms play a direct role in pricing and fare collection.

According to the report, the emergence of subscription-based platforms has created uncertainty over the applicability of GST, with differing interpretations by the Authority for Advance Rulings (AAR), including in Karnataka.

It said inconsistent rulings have added to regulatory ambiguity and could affect competition between different business models in the ride-hailing sector.

The survey also found strong support among drivers for subscription-based platforms. Nearly 90% of respondents said they used such platforms to find customers, while 42% said the model provided greater control over their earnings because of predictable operating costs.

More than three-quarters of drivers surveyed said that imposing a 5% GST burden under the subscription model would reduce their take-home income and could result in fewer working hours, the report said.