GST: GST fog blocks ride-hailing funding and innovation

App-based ride-hailing services have stymied innovation and new investment due to a lack of clarity on the goods and services tax (GST) rates applicable to different business models for taxi and autorickshaw rides, people familiar with the matter said.

The aggregators cite conflicting rulings by the Authority for Advance Rulings (AAR), saying recent rulings in Karnataka had taken divergent views on the applicability of GST on autorickshaw rides, while the Tamil Nadu body had upheld its applicability.

“The conflicting court orders have created uncertainty in the industry,” Uber said in an emailed response to an ET query, while revealing that it has moved the AAR to Karnataka (AAR-KA) seeking clarification.

The US-based company has also approached the Ministry of Finance and state GST authorities seeking clarification and resolution on the tax discrepancies.“To ensure a level playing field for all players in the industry, there must be predictability and consistency in tax administration. In a highly competitive environment, inconsistencies in tax application — such as those resulting from creative interpretation — can lead to the advantage of price arbitrage, creating further uncertainty,” an Uber spokesperson said.

Industry representatives say a lack of clarity in other states could lead to divergent interpretations.

“There is confusion in all states,” said the executive, who wished to remain anonymous.

The confusion was sparked by a recent AAR-KA ruling that Rapido must pay GST on services provided by taxi drivers using its app, treating the driver’s services as Rapido’s services.

“This overturns the previous ruling that companies like Multi-Verse and Juspay Technologies were not liable to pay GST on such transactions,” said Sadashiv Prasad, a practicing chartered accountant who advises aggregators on the matter.

The earlier decision, Prasad said, was beneficial to both drivers and passengers as drivers paid GST only on the subscription fee for the platform. The new ruling has raised concerns about complications in collecting the tax, he said, adding that “taxi drivers who benefited from the subscription model are worried about losing additional income, while passengers are worried about the return of higher prices.”

Rapido did not respond to ET’s emailed inquiry.

HD Arun Kumar, former senior tax administrator in Karnataka, said the AAR-KA had issued conflicting opinions on Namma Yatri and Rapido based on assumptions without fully understanding how these apps worked. In both cases, the operator was not liable for GST, he said.

Shan MS, COO of Namma Yatri, praised the AAR-KA ruling in his company’s case. “Since we don’t charge or set prices, and the rates are set in line with government rates, passengers benefit from fair prices and operators get the full value of their services. Our minimal technical charges apply only to drivers, and passengers are not charged any fees,” he said. “As part of the government-backed ONDC network, we are committed to democratising trade and enabling marginalised drivers to earn more. Our model has resulted in significant savings for all and we are happy that the public is embracing our app.”

Abhysyant Anasapurapu, co-founder of Multi-Verse Technologies, said the company created the MYn app to free passengers and drivers from the hassles they faced on platforms. “As a technology provider, we didn’t see any point in setting fares, monitoring the ride and collecting fares because that was a taxi driver’s business. We stayed away from that,” he said, while welcoming AAR’s opinion on his startup.

Aggregators who received a favorable ruling said some platforms were defrauding customers by charging them for rides during peak hours and charging drivers deductibles, and the ruling in their case freed both drivers and customers from that problem.