The government is working on a plan to clarify the Goods and Services Tax (GST) rules for cab aggregator apps. Sources told CNBC-TV18 that there is disparity in tax rules due to different business models like commission-based and Software-as-a-Service (SaaS) models.
The Central Board of Indirect Taxes and Customs (CBIC) is examining the suggestions of the industry and may soon place the issue before the GST Council. The Karnataka High Court has directed the CBIC to hold discussions with stakeholders and submit suggestions.
Difference between Commission and SaaS model
Commission model : Platforms like Uber and Ola charge 5% (without input tax credit) or 12% (with input tax credit) GST on each ride. This tax is collected from the passenger and deposited by the apps.
SaaS model: Platforms like Namma Yatri and Rapido charge drivers a monthly or daily subscription fee, which is subject to 18% GST. But no GST is charged from passengers for the ride.
What is the problem?
This disparity is leading to price hikes in the market. Industry insiders say that both models offer the same service (traffic), but different taxes are making the commission-based apps more expensive. “Rides are cheaper in the SaaS model, but that is because of tax benefits, not better functionality,” said a senior industry official.
What is legal confusion?
Under Section 9(5) of the CGST Act, services like passenger transport are taxable to the e-commerce platform rather than the driver. But it is not clear whether the SaaS model falls under this ambit, as these platforms claim to only connect drivers and passengers. The Karnataka Authority for Advance Rulings has held Namma Yatri and Myn (Multiverse Technologies) to be outside Section 9(5) as they only provide software. But platforms like Uber and Rapido are taxable due to their active role in ride management and customer service.
Given the growing demand for app-based transport services in India, there is a growing need for uniform tax rules. According to sources, the GST Council may amend Section 9(5) or issue clear guidelines for SaaS and commission models. This will bring clarity in taxation, create a level playing field and prevent revenue loss.
