Ride-hailing platforms like Ola and Uber have revolutionised urban mobility in India. Under Section 9(5) of the CGST Act, 2017, these platforms are treated as the supplier of passenger transport services and are liable to pay GST on each ride. This provision has significant implications for both the platforms and the drivers.
This article explains the GST framework for ride-hailing platforms under Section 9(5).
Section 9(5): ECO Liability for Passenger Transport
Under Section 9(5), the electronic commerce operator (ECO) is liable to pay GST on passenger transport services supplied through its platform. This means:
- The platform (Ola, Uber) is treated as the supplier for GST purposes.
- The platform must collect and remit GST at 5% on each ride.
- The driver is not required to pay GST on these services.
GST Rate on Ride-Hailing Services
Passenger transport services supplied through an ECO attract GST at 5% . This rate applies to the fare charged for the ride.
The SaaS Model Challenge
A growing number of ride-hailing platforms operate on a SaaS model , where they provide digital infrastructure for matching drivers and riders but do not intermediate payments. In this model, fares are settled directly between the driver and the passenger.
The industry has argued that applying Section 9(5) uniformly to SaaS platforms creates an "impossibility of compliance" because these platforms do not collect the fare and cannot discharge GST on the full ride value. The GST Council is examining this issue.
Compliance for Ride-Hailing Platforms
Platforms covered under Section 9(5) must:
- Register for GST.
- Pay GST at 5% on each ride.
- File GSTR-3B and report the tax paid.
- Maintain records of all rides and GST collected.
- Reconcile platform data with GST returns.
Compliance for Drivers
Drivers supplying services through an ECO:
- Are not required to pay GST on rides facilitated by the platform.
- May need to register for GST if they provide services independently.
Conclusion
Ride-hailing platforms operate under a special GST framework under Section 9(5). The platform is liable to pay GST on passenger transport services. However, the SaaS model has created compliance challenges that are currently under review by the GST Council.
At Anuj Desai & Associates, we provide expert advisory services on GST for ride-hailing platforms and aggregators. Our team can help you navigate the complexities of Section 9(5) and ensure compliance.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.