Introduction
India’s ride-hailing industry is undergoing a major transformation as companies like Uber, Ola, Namma Yatri, and Rapido shift from commission-based models to subscription-based platforms for auto-rickshaw and cab services. However, conflicting rulings by the Authority for Advance Rulings (AAR) on whether these platforms must collect Goods and Services Tax (GST) have created uncertainty for aggregators and tax authorities alike.
Understanding the GST Controversy
Ride aggregators previously collected 5% GST on fares under a commission-based model, where passengers paid directly via the app. However, under the subscription model, drivers pay a fixed fee for platform access, and passengers pay fares directly to drivers in cash or UPI.
Key Tax Implications:
- Uber’s Stand: Since February 18, 2025, Uber stopped levying 5% GST on auto rides, claiming that transactions between drivers and passengers occur independently.
- Conflicting AAR Rulings:
- November 2024: AAR Karnataka ruled that Uber must collect 5% GST even under a subscription model.
- September 2023: AAR ruled that Namma Yatri is NOT liable to collect GST, as it only connects passengers and drivers without facilitating transactions.
- Rapido’s Case (July 2024): AAR confirmed Rapido is liable for 5% GST on autos and cabs, similar to Uber’s ruling.
- Government Stance: Under Section 9(5) of the CGST Act, 2017, ride aggregators are responsible for collecting 5% GST on passenger transport services.
These rulings indicate uncertainty in GST applicability and have led to industry-wide discussions with tax authorities for clarification.
How Ride Apps Are Responding
1. Transition to a Subscription Model
To minimize GST liability, ride-hailing apps have shifted to a subscription-based model:
- Drivers pay a fixed platform fee instead of ride commissions.
- Passengers pay fares directly to drivers (cash/UPI), bypassing platform-led transactions.
2. No GST on Passenger Payments
- Since aggregators do not process payments, they argue that GST liability does not arise.
- Uber, Ola, and Namma Yatri now generate receipts instead of tax invoices, claiming that they do not provide transportation services directly.
3. Legal & Compliance Challenges
- AAR Rulings Are Not Uniform: Different verdicts for Uber and Namma Yatri create tax confusion.
- Tax Authorities Are Reviewing: The industry has sought a formal clarification on GST applicability under the new model.
Key Takeaways for Ride Aggregators & Users
For Aggregators:
- Monitor tax rulings and compliance changes.
- Consider structuring platforms as SaaS-based services to mitigate GST liability.
- Maintain clear documentation on fare estimation and app usage terms.
For Drivers:
- Subscription models reduce commission fees but may shift GST burden if rules change.
- Drivers should ensure correct invoice generation when charging passengers.
For Passengers:
- Expect cash/UPI payments to continue as apps move away from digital transactions.
- GST impact may vary depending on the ride-hailing platform’s approach.
Industry Outlook & Future Regulatory Changes
The GST treatment of ride aggregators is likely to evolve as:
- More clarity emerges from tax authorities on the liability of aggregators under subscription models.
- Future litigation could set new precedents for taxation in the digital economy.
- Potential amendments to Section 9(5) of the CGST Act to address digital platforms’ evolving business models.