The 57th GST Council meeting on Wednesday is likely to resolve long-pending tax disputes involving e-commerce and app-based cab services by simplifying rules for services supplied through digital platforms, irrespective of their commercial models, government sources said.
“The tax on a booking will depend on the service supplied and not on how a platform arranges its contracts. The same delivery will bear the same tax, whichever way it is routed,” a source said.
The move is expected to settle whether ride-hailing platforms operating on commission-based and subscription or SaaS models face the same GST liability. App-based passenger transport services generally attract 5% GST, with the electronic commerce operator (ECO) liable to pay the tax under Section 9(5) of the CGST Act.
“The policy question is whether GST liability on the same passenger ride should depend on the platform’s contractual arrangement — commission versus subscription — or on the fact that the ride is facilitated through the digital platform,” said Rajat Mohan, managing partner, AMRG & Associates.
Vivek Jalan, partner, Tax Connect Advisory Services, said judicial forums have largely held that where a supply is facilitated through a platform, the ECO may attract liability under Section 9(5). The Council’s move is expected to provide certainty and reduce litigation over who pays GST in the digital economy.
Rapido has faced litigation over whether zero-commission, subscription-based ride-hailing platforms must pay 5% GST on the entire passenger fare as deemed suppliers. Uber India has also approached the Karnataka High Court over the lack of clarity on the applicability of Section 9(5) to subscription-based models.
“The platforms remain unclear whether they are liable to pay 5% GST on the entire fare as deemed suppliers, or 18% GST on subscription fees or commissions charged to drivers,” said Karthik Mani, partner and leader, indirect tax, South, Tax & Regulatory Advisory, BDO India.
The industry has also sought relief under Section 11A of the CGST Act for legacy disputes, including 18% GST demands on food-delivery fees and the classification of delivery services as exempt GTA services.
“Section 11A could provide a calibrated mechanism for closing these legacy disputes. The same tool could also address other controversies arising from unsettled tax treatment,” said Manoj Mishra, partner and tax controversy management leader, Grant Thornton Bharat.