Karnataka HC Stays AAR’s Plans To Revoke Tax Exemption For Namma Yatri

The Karnataka High Court (HC) has reportedly stayed the notice issued by the state authority for advance ruling (AAR), which earlier this month suggested rescinding the tax reprieve granted to ride-hailing platform Namma Yatri.

In 2023, the authority ruled that Namma Yatri (then operated by Juspay), unlike rivals like Ola Cabs and Uber, operated under the SaaS model and as such was not required to collect GST on fares. However, the platform sought the extension after Namma Yatri was hived off as a separate entity by Juspay under the name Moving Tech Innovations. 

As per Economic Times, a HC bench of Justice Sachin Shankar Magadum stayed the AAR’s June 19 show cause notice and also issued a notice to the authority. The HC also directed the “additional government advocate” (AAR) to return with a justification for invoking Section 104 of the CGST Act against Namma Yatri.

“The short point that arises for consideration before this Court is whether respondent No.2 (deputy commissioner for Karnataka AAR) was justified in issuing the show cause notice dated 19.06.2025 to the petitioner-company under Section 104 of the Central Goods and Services Tax Act, 2017, solely on the ground that the petitioner-company has transferred its assets to Moving Tech Innovations, a registered company and an associated entity of the petitioner,” the order read.

For context, Section 104 of the Act rules that advance rulings can be nullified in instances where exemptions have been obtained by the applicant by “fraud or suppression of material facts or misrepresentation of facts”.

During the hearing, the counsel for Moving Tech argued that invoking Section 104 was permissible only in cases involving suppression of material facts or misrepresentation. The company further argued that merely transferring the assets from Juspay to Moving Tech Innovations did not, by itself, amount to either suppression or misrepresentation. 

Prima-facie finding merit in Moving Tech Innovations’ plea, the court observed that the show cause notice did not reveal any specific allegation of misrepresentation. 

“A perusal of the impugned show cause notice does not reveal any specific or detailed allegation of suppression or misrepresentation. It appears that the sole basis for issuance of the impugned notice is the transfer of assets by the petitioner-company to Moving Tech Innovations. The action of the authority in invoking Section 104 of the Act, therefore, warrants a deeper examination,” the HC noted. 

The development comes at a time when rivals like Ola and Uber, too, are moving to the subscription model and shunning commission-led model. The move could open the floodgates of litigation for other companies as GST authorities debate the levy of such taxes on the new subscription-led models.