Exclusive: GST on ride-hailing platforms faces fresh scrutiny as industry flags SaaS model mismatch
India’s app-based mobility sector has approached the Finance Ministry with an industry representation seeking clarity on the applicability of Section 9(5) of the Central Goods and Services Tax Act, 2017, highlighting what it calls a structural mismatch between the law and emerging platform business models.
The representation argues that the current GST framework, which mandates a 5% tax on ride fares to be collected by e-commerce operators, does not adequately distinguish between traditional cab aggregators and SaaS-based platforms—leading to compliance challenges, higher costs, and regulatory uncertainty.
What Section 9(5) mandates
Section 9(5) of the Central Goods and Services Tax Act, 2017 places the responsibility of collecting and depositing GST on electronic commerce operators facilitating passenger transport services. In effect, platforms—not drivers—are treated as the supplier for tax purposes, and are required to levy 5% GST on each ride.
While this framework has been largely workable for established aggregator models, the industry says its blanket application is now being tested by newer platform structures.
Aggregator vs SaaS: A structural divide
At the heart of the representation is the distinction between two operating models within India’s ride-hailing ecosystem.
Traditional aggregators such as Uber and Ola operate as full-stack platforms. They manage fare discovery, collect payments from riders, and subsequently disburse earnings to drivers after deducting commissions. This control over the transaction flow enables them to comply with GST obligations under Section 9(5).
In contrast, a growing set of platforms—including government-backed initiatives like Bharat Taxi and other app-based services—operate on a SaaS model. These platforms primarily provide digital infrastructure for matching drivers and riders but do not intermediate payments. Instead, fares are settled directly between the driver and the passenger.
It is this lack of control over the financial transaction that, according to the industry, creates a fundamental disconnect with the GST provision.
Why the current GST treatment is being challenged
The industry representation contends that applying Section 9(5) uniformly across both models results in an “impossibility of compliance” for SaaS platforms. Since these platforms do not collect the fare, they are not in a position to discharge GST on the full ride value.
As a result, the tax burden is effectively passed on—either to drivers through reduced earnings or to consumers through higher fares. The industry argues that this runs counter to the objectives of affordability and gig economy formalisation that digital mobility platforms were meant to advance.
