GST ambiguity persists for ride-hailing apps as food delivery now faces 18% levy

In contrast, ride-hailing apps such as Uber, Rapido, and Ola continue to seek clarity on whether GST applies to passengers under the subscription model, where drivers already pay 18 per cent on daily or weekly platform fees.

Zomato and Swiggy have been held liable for 18 per cent GST on delivery services, though they contend that, contractually, the service is provided by delivery partners to customers and not by the platforms themselves. Similarly, in ride-hailing, platforms maintain that drivers are independent, with apps merely connecting them to passengers.

The role of ride-hailing apps as facilitators has gained importance with the spread of the subscription model, where the 5 per cent GST is no longer levied on rides — unlike in the commission-based model, where it continues to apply. Under the subscription model, passengers select ‘cash’ as their payment method and settle fares directly with drivers, either in cash or via UPI, while drivers pay apps a periodic fee for platform access.

Still, legal ambiguity persists over whether the 5 per cent GST should apply even under this model, since apps are arguably still providing a service to passengers.

The Karnataka bench of the Authority for Advanced Ruling (AAR) had ruled in November 2024 that Uber remains liable to collect and pay 5 per cent GST under the subscription model, even when it is not collecting any payment from passengers.

In contrast, an earlier September 2023 ruling by the same bench on an application by Namma Yatri stated it was not required to collect GST from passengers, on grounds that it only links drivers to passengers without being directly involved in the transport service.

In February this year, Uber switched to a subscription model for auto rickshaw rides, following rivals Namma Yatri, Rapido, and Ola. Unlike commissions that take up to 30 per cent of drivers’ daily earnings, the subscription model charges fixed fees with no commissions, aimed at drawing more drivers onto platforms. For passengers, this typically means cheaper fares, as no 5 per cent GST is levied on them.

The shift gained traction after Namma Yatri, developed by Juspay Technologies with Bengaluru’s Auto Rickshaw Drivers’ Union (ARDU), launched it for autos in September 2023 and expanded to cabs in April 2024.

Rapido introduced subscription plans for cab drivers in December 2023 and for autos in February 2024. Ola followed in April 2024 with plans for autos across Delhi-NCR, Mumbai, Bengaluru, and Hyderabad, and extended them to cabs in June.

Uber, which has a firmer footing in the four-wheeler space, has yet to adopt the subscription model for cabs, but that could change soon in the absence of any official clarification on GST liability and due to intensifying competition.