Rapido Seeks Exemption from GST on Zero-Commission Ride-Hailing Models

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. “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. 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. The exemption it seeks is limited to subscription verticals. “Specifically, we seek clarification that discovery-only ride verticals under subscription models are not covered under Section 9(5) of GST,” he said. “Any additional tax applied on the underlying fare can influence overall affordability for users and net earnings for driver-partners, particularly in high-frequency, low-ticket urban commute scenarios,” Krishna added. Rapido’s position aligns with a wider industry effort. The Internet and Mobile Association of India (IAMAI), which represents Uber, Ola, and Rapido amongst others, in a letter dated January 19 to Revenue Secretary Arvind Shrivastava, had urged the GST Council to re-examine Section 9(5) and exempt SaaS-based models from its ambit. The letter argued the 5% GST has a “direct and disproportionate impact on driver earnings and affordability” and flagged “contradictory rulings” by State Authorities on Advance Ruling on the provision’s applicability to SaaS models, saying the industry “continues to operate under great uncertainty.” The letter had noted the issue extends beyond private aggregators. It had warned the the impact would extend to government-backed Bharat Taxi, India’s first cooperative ride-hailing platform launched by Home Minister Amit Shah earlier this month, which also operates on a flat daily subscription with zero-commission.