GST on Subscription-Based Cab Services: A Call for Simplification
In a rapidly evolving gig economy, subscription-based cab services offer drivers an opportunity to boost their earnings and achieve financial independence. However, recent GST rules that impose taxes on cab aggregators under subscription models threaten to derail these benefits. Let’s break down why simplifying GST for these services is crucial.
📋 The Subscription Model vs. Commission-Based Model
In the subscription-based model, drivers pay a fixed fee to access a platform that connects them with passengers. Unlike the traditional commission model, where platforms deduct 30-40% of each fare, subscription-based cab services allow drivers to retain 100% of their earnings. The transparency and control in this model have led to a 20% increase in drivers joining such services.
However, under the current GST framework, e-commerce operators are liable to pay GST on services provided through their platform, even if the platform doesn’t receive any commission. This approach needs reconsideration.
🤔 Why GST on Subscription-Based Earnings is Faulty
- Transparent Transactions: In subscription-based cab services, the aggregator only charges a fixed subscription fee (on which GST is already paid). The fare collected by drivers goes directly to them.
- No Platform Involvement: Unlike the commission model, the platform merely connects drivers with passengers and does not process payments. Hence, taxing the aggregator for drivers’ earnings is illogical.
Relevant Case Law: The principle laid down in M/s. Zomato Media Pvt Ltd. vs. Commissioner of Service Tax (2018) clarifies that GST should apply to the actual consideration received by the platform, not third-party earnings.
🟢 Empowering Drivers with Financial Independence
Drivers have long faced challenges under commission-based models, including:
- Hefty Commissions: Deduction of 30-40% from fares.
- Incentive Manipulation: Forceful targets and opaque incentive structures.
Subscription-based cab services solve these problems by providing:
- Operational Freedom: Drivers choose their rides and passengers.
- Full Transparency: No hidden deductions or penalties.
This model empowers drivers to manage their schedules, maximise earnings, and avoid arbitrary penalties.
🔦 Digital Platforms Should Benefit, Not Exploit
Digital platforms have immense potential to uplift the gig economy, but their misuse in commission-based models has caused frustration for drivers. The subscription-based model ensures:
- Instant Payments: No delays or deductions.
- Clear Accountability: Direct transactions between drivers and passengers.
Revising GST rules to support this model will sustain these benefits and promote fairness in the gig economy.
🚀 A Win-Win Solution for All
Subscription-based cab services combine the efficiency of technology with the autonomy of offline operations. Drivers enjoy:
- More Rides: Technology-driven lead generation.
- Full Earnings: Retain 100% of the fare.
Simplifying GST for these services will encourage more drivers to join the gig economy, boost employment opportunities, and drive economic growth.
📢 A Plea to the GST Council
To support the driver community and promote transparency, the GST Council should:
- Exempt subscription-based cab services from GST on driver earnings.
- Tax only the subscription fee collected by platforms.
This change will uphold the social good achieved by these services and empower gig workers.