GST on ride-hailing: Karnataka AAR says may recall ruling on Namma Yatri
Karnataka's Authority for Advance Ruling (AAR) has informed Juspay Technologies that it might reverse an earlier ruling that said the Softbank-funded startup’s Namma Yatri cab-hailing service was not liable to collect GST on auto-rickshaw rides booked on the platform.
This comes after Bengaluru-based Juspay hived off the cab-hailing business to a subsidiary, Moving Tech Innovations.
The AAR, a statutory body that provides clarity on the applicability of GST, ruled on September 15, 2023, that Namma Yatri was not liable to collect GST on auto-rickshaw fares because it followed a software-as-a-service (SaaS) model. Under this model, the platform collects a fixed subscription fee from auto-rickshaw drivers for using its services, and not a per-ride commission. Cab-hailing platforms like Ola and Uber collect a 5% GST on the fares.
In its latest notice dated June 19, the AAR said it gathered from Moving Tech’s application that the company acquired Namma Yatri as a “going concern.” The authority said it could declare the September 2023 ruling void because Juspay had obtained it by suppressing/misrepresenting material facts. Also, the earlier ruling was binding only on the applicant who had sought it (Juspay, which no longer owns Namma Yatri) and the concerned jurisdictional GST officials, it said.
The notice, which ET has seen, has fixed a hearing on June 27, Friday, for Juspay and Moving Tech to appear and counter the AAR’s assessment if they want to do so.
A GST official in Karnataka confirmed sending the notice. Juspay and Namma Yatri did not respond to emails seeking comment.
A couple of GST practitioners viewed the AAR move as rare, probably unprecedented.
HD Arun Kumar, a former additional commissioner of commercial taxes with the experience of chairing the AAR, told ET that the AAR lacks the authority to recall its own order, but such reversals can happen either on appeal or on a review by higher authorities.
On the notice to Juspay, he said it is vague about the facts that it alleges were concealed or misrepresented. “This appears to be a very clumsy effort to negate a business-friendly provision provided by Parliament,” he said.
The development comes up at a time when app-based ride-hailing services such as Uber, Ola, and Rapido are renewing efforts to resolve their differences with the Central Board of Indirect Taxes & Customs (CBIC) over the applicability of GST on rides booked through ecommerce platforms, after Uber India raised concerns about a lack of uniformity and a level playing field.
The CBIC, sources said, has been working to figure out a solution to the concerns of ecommerce operators over their GST liability. The CBIC chairman and other top officials had met the aggregators and gathered inputs to explore a way out of the vexed issue.
The CBIC has been bound by a Karnataka High Court order asking it to decide on Uber India’s representations on the subject after hearing all stakeholders.
Uber moved the high court last year, seeking clarity on Section 9(5) of the CGST Act that deals with the applicability of tax on ecommerce platforms, and whether ecommerce operators offering passenger transportation services must pay GST under this provision.
ET reported earlier that ride-hailing platforms have slammed the brakes on innovation as well as fresh investments for want of clarity on the GST rates applicable under different business models on taxi and auto-rickshaw rides. Rapido and Ola Consumer have a subscription model for auto-rickshaws and four-wheeler taxis, while Uber has it only for auto-rickshaws.
This comes after Bengaluru-based Juspay hived off the cab-hailing business to a subsidiary, Moving Tech Innovations.
The AAR, a statutory body that provides clarity on the applicability of GST, ruled on September 15, 2023, that Namma Yatri was not liable to collect GST on auto-rickshaw fares because it followed a software-as-a-service (SaaS) model. Under this model, the platform collects a fixed subscription fee from auto-rickshaw drivers for using its services, and not a per-ride commission. Cab-hailing platforms like Ola and Uber collect a 5% GST on the fares.
In its latest notice dated June 19, the AAR said it gathered from Moving Tech’s application that the company acquired Namma Yatri as a “going concern.” The authority said it could declare the September 2023 ruling void because Juspay had obtained it by suppressing/misrepresenting material facts. Also, the earlier ruling was binding only on the applicant who had sought it (Juspay, which no longer owns Namma Yatri) and the concerned jurisdictional GST officials, it said.
The notice, which ET has seen, has fixed a hearing on June 27, Friday, for Juspay and Moving Tech to appear and counter the AAR’s assessment if they want to do so.
A GST official in Karnataka confirmed sending the notice. Juspay and Namma Yatri did not respond to emails seeking comment.
A couple of GST practitioners viewed the AAR move as rare, probably unprecedented.
HD Arun Kumar, a former additional commissioner of commercial taxes with the experience of chairing the AAR, told ET that the AAR lacks the authority to recall its own order, but such reversals can happen either on appeal or on a review by higher authorities.
On the notice to Juspay, he said it is vague about the facts that it alleges were concealed or misrepresented. “This appears to be a very clumsy effort to negate a business-friendly provision provided by Parliament,” he said.
The development comes up at a time when app-based ride-hailing services such as Uber, Ola, and Rapido are renewing efforts to resolve their differences with the Central Board of Indirect Taxes & Customs (CBIC) over the applicability of GST on rides booked through ecommerce platforms, after Uber India raised concerns about a lack of uniformity and a level playing field.
The CBIC, sources said, has been working to figure out a solution to the concerns of ecommerce operators over their GST liability. The CBIC chairman and other top officials had met the aggregators and gathered inputs to explore a way out of the vexed issue.
The CBIC has been bound by a Karnataka High Court order asking it to decide on Uber India’s representations on the subject after hearing all stakeholders.
Uber moved the high court last year, seeking clarity on Section 9(5) of the CGST Act that deals with the applicability of tax on ecommerce platforms, and whether ecommerce operators offering passenger transportation services must pay GST under this provision.
ET reported earlier that ride-hailing platforms have slammed the brakes on innovation as well as fresh investments for want of clarity on the GST rates applicable under different business models on taxi and auto-rickshaw rides. Rapido and Ola Consumer have a subscription model for auto-rickshaws and four-wheeler taxis, while Uber has it only for auto-rickshaws.
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