Uber, as an e-commerce operator, is required to collect and pay GST on passenger transportation services provided by cab drivers using its proposed new platform, Karnataka’s Authority for Advance Ruling (KAAR) has said. It also said that the cab aggregator will be liable for GST even if its application (APP) only connects the driver and passenger with the driver supplying the service.
In its ruling, pronounced on November 4, the AAR held that the applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualized in the GST Act. “The Applicant is liable to collect and pay GST on the supply of services supplied by the drivers/ service provider (person who has subscribed to online Uber platform in relation to proposed business model) to their customers (person who has subscribed to online Uber platform/identified on the Uber’s platform) under the proposed business model,” AAR said in its ruling.
This ruling assumes significance for two reasons. First, On September 26, the Karnataka High Court asked the AAR to dispose of the matter within six weeks, and accordingly, the AAR gave its ruling. Second, the High Court will take up the matter on November 12. Earlier, the High Court had given an interim stay on the matter. Uber and other ride-booking apps also made representation to the Central Board of Indirect Taxes and Customs (CBIC) on the applicability of GST. Now, it is expected that the matter could be discussed in the next GST Council meeting, which is likely to occur next month.
During the hearing, the company contended that they are not involved in collecting the consideration for the ride on behalf of the driver. AAR observed that the passenger pays the consideration to the driver directly. It is pertinent to mention here that neither the definitions of electronic commerce nor electronic commerce operator under Section the CGST Act 2017 stipulate that the e-commerce operator has to collect the consideration.
Further, it said that though the contract is between the driver and the passenger and the service is supplied by the driver to the passenger, liability to pay tax is fastened on the electronic commerce operator by way of deeming provision GST Act where it has been said that all its provisions “shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services”.
Here, the supply of such service refers to the supply of services for transportation of passengers by radio taxi, motor cab, maxi cab, and motorcycle, supplied through the electronic commerce operator.
Accordingly, “we find that the applicant is squarely covered in the definition of electronic commerce operator and the supply of services by way of transportation of passengers in the proposed commission free monetization model by an auto-rickshaw, radio-taxi, motor-cab, maxi-cab and motor cycle is supplied through them,” AAR said.