NEW DELHI: The Goods and Services Tax (GST) Council is likely to meet before mid-July to consider proposals to simplify procedures and clarify matters including the taxation of ride-hailing app companies, according to two people aware of the development.
The proposals likely to make it to the agenda include making tax registration and claiming tax credits simpler. Simpler procedures and input tax credit norms are expected to make compliance easier for businesses.
While the reforms aim to streamline registration and invoice reconciliation, taxpayers continue to face practical challenges around withdrawal of registration applications and input tax claim-related procedural certainty, said Ikesh Nagpal, lead-indirect tax at AKM Global, a tax and consulting firm.
The meeting may be scheduled before the monsoon session of Parliament that runs from July to August.
In the case of cab aggregators such as Uber and Rapido, the effort will be to clarify the taxability of their operations. The issue arises from Section 9 (5) of the Central GST Act, which states that e-commerce operators are liable to pay 5% GST on passenger fares. The notified services include those provided by radio-taxis, motor cabs, maxi cabs and motorcycles.
However, app companies that follow a subscription model—where drivers pay the platform a fixed fee—contend that they merely connect drivers and passengers and do not decide the fares or collect them. If a platform does not decide or collect fares it is not liable to pay tax, according to the ride-hailing companies.
“The idea is to bring clarity in the law itself to avoid disputes. We cannot let enforcement personnel interpret this, leading to potential disputes. GST reforms are meant to ensure clarity and certainty in taxation,” the first person said on condition of anonymity.
Technology providers
Ride-hailing app companies pay GST only where there is a platform fee or commission paid by the driver-partners, but not on payments that customers make bilaterally, the person said.
Different Authorities for Advance Ruling have given contradicting interpretations on the legal requirement for taxation on supply of service through such platforms.
The issue was examined by the GST Council at its in December 2024 but a decision was deferred so that a panel of officers could examine it further.
Vivek Krishna, vice president of finance at Rapido, said that in subscription-led, zero-commission models, platforms function purely as technology providers, enabling discovery between riders and driver-partners, with fares negotiated and settled directly.
“Applying GST on ride fares in such cases creates a structural inconsistency with the intent of the law and is not viable to be enforced by platforms as they neither set prices nor collect payments. At a time when subscription-based models are improving driver autonomy and supporting more equitable earnings, this can affect driver-partners’ take-home earnings and make everyday mobility more expensive for consumers,” said Krishna.
The aim of the law was to enable revenue collection from the monetary value of transportation services rendered by these drivers. However, the annual turnover of drivers will mostly be less than ₹40 lakh, the threshold for taking GST registration.
“In this context, we echo driver-partners’ concerns by requesting for clarification that discovery-only ride-hailing platforms under subscription models are not covered under Section 9 (5) of the GST act, so that the framework aligns with evolving ground realities while supporting driver welfare and consumer affordability,” said Krishna.
Queries emailed to the finance ministry, the GST Council secretariat and to Uber remained unanswered at the time of publishing.