Exempt zero-commission models from 5% GST on fares, says Rapido
Ride-hailing platform Rapido has called on the government to exempt zero-commission-based subscription-models from Section 9(5) of the Central Goods and Services Tax Act, which mandates all electronic commerce operators facilitating passenger transportation to collect 5% GST on every ride fare.
Rapido says it pays 18% GST on the recharge packs it sells to driver-partners as a technology subscription service. Levying an additional 5% on the ride fare, a transaction the platform says it doesn’t intermediate, amounts to the same service being taxed at two points in the value chain, the company argued.
What did Vivek Krishna say?
“In recharge-based or subscription-led models, the platform functions purely as a technology provider — in other words, a discovery-only ride platform, enabling discovery between riders and driver-partners where fares are negotiated and settled directly without involvement of the platform.
In such cases, applying GST on the passenger fare and mandating the platform to collect it creates a structural inconsistency with the intent of the law,” said Vivek Krishna, VP – Finance at Rapido in an interaction with FE.
Currently, Section 9(5) applies to all platforms facilitating passenger transportation regardless of whether they collect the fare or merely connect riders with drivers through a subscription or recharge model.
Zero-commission driver-side subscription-based models have grown in popularity over the last couple of years. Pioneered by Namma Yatri, all major ride-hailing platforms, including Rapido, Uber, and Ola, now operate subscription or recharge-based models in multiple segments.
For autos, all major platforms charge zero commission with daily recharge plans of ~Rs 10-50.
Cab giants move to daily/monthly subscription based models
For cabs, Uber and Ola have also recently moved to daily/monthly subscription-based models ranging from Rs 100-2000 for majority of its fleet. However, all platforms continue to operate on commission-basis for bike taxis at 30-40% of the ride fare.
Therefore, Rapido’s ask is not a blanket one. For bike taxis, where it runs a commission-based model, the company accepts the current GST framework.
“In commission-based models, where the platform intermediates the ride and is involved in fare collection, the current GST framework under Section 9(5) has been operationally followed by the industry,” Krishna said.
