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Ola, Uber, and Rapido seek clarity from CBIC on GST treatment of their SaaS business models amid regulatory inconsistencies.
Major ride-hailing operators Ola, Uber, and Rapido are said to be preparing to approach the Central Board of Indirect Taxes and Customs (CBIC) in a quest for clarity on how their SaaS business model is treated under the Goods and Services Tax (GST) amid continued regulatory inconsistencies.
The action comes after dueling orders from the Karnataka Authority for Advance Ruling (AAR), which have generated uncertainty in the manner in which SaaS models of various ride-hailing firms are taxed. Players in the industry say the uneven treatment is warping competitive balance.
In an effort to lower GST liability and increase drivers' control, some platforms have shifted from a commission-based model to a subscription-based SaaS model. Here, drivers pay a flat platform usage fee daily or monthly and keep 100% of their ride revenues. This approach turns the platforms into technology service providers instead of intermediaries.
In early June, Ola launched its zero-commission SaaS model across the country for cabs, building on its current model for autos and bikes. Its competitors, such as Rapido and Namma Yatri, had already launched similar subscription plans for auto drivers in 2023.
However, while Namma Yatri’s SaaS model was exempted from GST by the Karnataka AAR, Rapido has been classified as an e-commerce operator, making it subject to GST—despite offering a comparable service. This inconsistency led Uber to challenge the ruling before tax authorities last year.
Industry players opine that India's tax legislations must adapt to support platform-based SaaS innovations, particularly in the mobility space, to ensure regulatory equivalence and encourage tech entrepreneurship.
While ride-hailing platforms wait for a formal solution, attention is now directed towards how the CBIC will view the SaaS model under India's GST regime.
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