GST on subscription ride-hailing platforms like Rapido and Bharat Taxi may hit driver earnings: Report
The report, based on a survey of more than 2,100 drivers and passengers across 13 cities, examines subscription or software-as-a-service (SaaS) models used by platforms such as Rapido, Bharat Taxi and similar apps, in which drivers typically pay a fixed subscription fee for access to customers and negotiate fares directly with passengers.
The study compares this to commission-based aggregators like Uber and Ola, where platforms typically set fares, collect payments and deduct commission before passing the rest on to drivers.
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Under India’s GST framework, passenger transport services provided through e-commerce operators fall under Section 9(5) of the Central Goods and Services Tax Act, which shifts tax liability to platforms for certain notified services.
Applying this provision to subscription-based models increases enforcement difficulties because such platforms do not set fees or collect payments, the report said.
“A platform cannot pay tax on a transaction value that it does not collect and has no visibility into,” Esya Center said in its report. The study noted that although drivers are generally liable for GST as service providers, most of them fall below the Rs 20 lakh annual turnover threshold for registration.
Ride transportation services were brought under Section 9(5) through a 2017 notification targeting commission-based aggregators where platforms like Uber and Ola act as intermediaries in fare collection and pricing.
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The rise of subscription-based models has triggered regulatory uncertainty, with varying interpretations by the Authority for Advanced Rulings (AAR), including in Karnataka, the report said.
The emergence of subscription-based models, where drivers pay a fixed fee and negotiate fares directly with passengers, has raised questions about the feasibility of GST. The issue has led to different decisions by the Authority for Advance Rulings (AAR), including in Karnataka.
The report stated that inconsistent interpretations create uncertainty in the legislation and may disrupt competition between platform models.
Survey findings revealed driver’s strong preference for subscription-based platforms, pointing to predictable costs and higher net earnings. Nearly 90 percent of drivers surveyed said they use such platforms for leads, while 42 percent said the model gives them more control over earnings.
More than three-quarters of drivers said the 5 per cent GST burden under the subscription model would reduce take-home income and lead to fewer working hours, the report said.
On the demand side, nearly two-thirds of passengers said they would reduce usage if fares increased; This shows that there is sensitivity to price changes, especially among women and low-income users.
The report warned that higher costs could push drivers and passengers into informal transport channels, potentially reversing gains in digital adoption and security.
It suggested that the GST liability under Section 9(5) be restricted to platforms involved in fee determination and payment collection and that compliance and security features be excluded from tax classification tests.
Esya Center said a clearer framework would reduce regulatory uncertainty, support competition between mobility platforms and maintain tax neutrality across business models.
