While app-based ride-hailing services currently attract 5% GST on ride fares, there is an ongoing debate centred on how the tax should apply to subscription-based and discovery-only platform models. The GST Council is now looking into it, as per media reports.
The GST Council is expected to meet before mid-July, just ahead of the monsoon session of Parliament, with ride-hailing taxation and broader compliance simplification both on the likely agenda, reported The Mint.
The Two-Model Problem
The confusion stems from Section 9(5) of the Central GST Act, which makes e-commerce operators responsible for collecting 5% GST on passenger fares. That works cleanly for subscription-based platforms, which collect fares, take their cut, and pay out drivers. The platform controls the transaction, so taxing it makes sense.
But newer platforms, Rapido being the most prominent, operate on a subscription model. Drivers pay a fixed daily or weekly fee to access the app; fares are settled directly between driver and passenger, with the platform playing no role. These platforms argue, with some logic, that there is no aggregated fare for them to levy GST on. The 18% GST, they say, should only cover the subscription fee.
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State-level tax authorities have reached contradictory conclusions on this. Karnataka’s Advance Ruling Authority declared that Namma Yatri falls outside Section 9(5) — then ruled in a separate case that Rapido is liable. The issue has gained attention as similar subscription-based mobility platforms have faced differing GST interpretations despite operating under comparable business structures.
More Than Just Cab Apps
Alongside the ride-hailing question, the Council is also expected to take up simplification of GST registration procedures and input tax credit rules — two areas that have frustrated businesses since the system launched in 2017. Making it easier to withdraw registration applications and bringing more predictability to ITC claims would offer genuine relief to finance teams across industries.
The July meeting, if it delivers, won’t just tidy up a tax technicality. It will signal whether India’s GST architecture can keep pace with how platform businesses actually operate — not just how they looked when the law was written eight years ago.
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