GST on Subscription Ride-Hailing Platforms May Hit Driver Earnings, Esya Centre Report Says

Extending GST liability to subscription-based ride-hailing platforms such as Rapido and Bharat Taxi could reduce driver earnings, curb participation and weaken passenger demand, an Esya Centre report said.

The report, based on a survey of more than 2,100 drivers and passengers across 13 cities, examines subscription or software-as-a-service (SaaS) models used by platforms such as Rapido, Bharat Taxi and similar apps, where drivers typically pay a fixed subscription fee for access to customers and negotiate fares directly with passengers.

The study contrasts this with commission-based aggregators such as Uber and Ola, where platforms generally set fares, collect payments and deduct a commission before transferring the remainder to drivers.

Under India's GST framework, passenger transport services supplied through e-commerce operators fall under Section 9(5) of the Central Goods and Services Tax Act, which shifts tax liability to platforms for certain notified services.

The report said applying the provision to subscription-based models raises implementation challenges, as such platforms neither determine fares nor collect payments.

"A platform cannot remit tax on a transaction value that it does not collect and has no line of sight on," the Esya Centre report said.

The study noted that while drivers are generally liable for GST as service providers, most fall below the ₹20 lakh annual turnover threshold for registration.

Passenger transport services were brought under Section 9(5) through a 2017 notification aimed at commission-based aggregators, where platforms such as Uber and Ola act as intermediaries in fare collection and pricing.

The report said the rise of subscription-based models has triggered regulatory ambiguity, with differing interpretations by Authority for Advance Rulings (AAR), including in Karnataka.

The emergence of subscription-based models, where drivers pay a fixed fee and directly negotiate fares with passengers, has raised questions over GST applicability. The issue has led to differing rulings by the Authority for Advance Rulings (AAR), including in Karnataka.

The report said inconsistent interpretations have created regulatory uncertainty and could distort competition between platform models.

Survey findings showed strong driver preference for subscription-based platforms, citing predictable costs and higher net earnings. Nearly 90% of drivers surveyed said they used such platforms for customer leads, while 42% model would reduce take-home income and could lead to fewer working hours, the report found.

On the demand side, about two-thirds of passengers said they would reduce usage if fares increased, suggesting sensitivity to price changes, particularly among women and lower-income users.

The report warned that higher costs could push drivers and passengers toward informal transport channels, potentially reversing gains in digital adoption and safety.

It recommended limiting GST liability under Section 9(5) to platforms involved in fare determination and payment collection, and excluding compliance and safety features from tax classification tests.

The Esya Centre said a clearer framework would reduce regulatory uncertainty, support competition among mobility platforms and maintain tax neutrality across business models.