Ola, Uber, Rapido To Seek GST Clarity On Their SaaS Model: Report

Ride-hailing platforms like Ola, Uber and Rapido will reportedly approach the Central Board of Indirect Taxes and Customs (CBIC) regarding goods and services tax (GST) on their SaaS model following conflicting rulings from the Karnataka Authority for Advance Ruling (AAR).

An ET report, citing people familiar with the matter, said that the ride-hailing firms have alleged that the Karnataka AAR’s decision is distorting competitive parity in the sector. 

Inc42 has reached out to Rapido, Uber, Ola for comments on the development. The story will be updated based on their responses.

To minimise GST liability, ride-hailing platforms have shifted to the subscription-based model, where drivers pay a fixed platform fee instead of ride commissions. 

Earlier this month, Ola launched a SaaS-based zero commission model for its cab drivers, allowing them to retain 100% of their earnings by subscribing to a daily or monthly pass. This model, which has already been implemented for autos and bikes, is now available nationwide for cabs. Its rivals Rapido and Namma Yatri had already introduced similar SaaS models for their auto drivers last year.

The zero-commission model for drivers was initially making rounds in the market when Namma Yatri adopted that in its platform, which was then picked by Rapido. Further, Uber made the switch earlier in February this year.

While SaaS platforms like Namma Yatri have been exempted from GST by the Karnataka AAR, others like Rapido remain liable, having been classified as ecommerce operators. 

Last year, Uber challenged this inconsistency before the Karnataka Authority for Advance Rulings and the GST Council, arguing that it creates unfair competition and ambiguity in the interpretation of tax laws.

The Karnataka government directed regional transport authorities to levy convenience fees and GST on auto rides booked by passengers through ride-hailing apps in November 2022. Meanwhile, various states have raised questions on the disparity between the fare app aggregators levy and the fare notified by the government.

This development also comes on the sidelines of ride-hailing majors Rapido, Uber and Ola temporarily suspended their bike taxi operations in Karnataka complying to the recent High Court order that banned bike taxis in the region, till a regulatory framework is prepared for recognising bike taxis in Karnataka.

On the other hand, to compete with giants like Ola, Uber and Rapido, the Centre announced the launch of a new state-backed ride-hailling service called ‘Sahkar Taxi’, in March this year, which will onboard two-wheeler and four-wheeler taxis, as well as rickshaws.

It is observed that the issue around pricing on these platforms have always remained constant from the side of users, while concerns around commissions have prevailed consistently from the side of drivers.