“Cab Services” by Rapido liable to GST: AAR [Read Order]

The Advance Ruling Authority Bench noted that Rapido qualifies as an e-Commerce Operator under GST Laws.

The Karnataka Authority for Advance Rulings (AAR) has ruled that the ride-hailing platform ‘Rapido’ is liable to pay goods and services tax for its cab services, a ruling that potentially adds to the ambiguity over GST applicability on app-based mobility companies operating the subscription model. The primary issue before the AAR was to ascertain if Rapido meets the definition of an e-commerce operator as per Sections 2(44), 2(45), and 9(5) of the CGST Act, 2017. These sections outline the nature of electronic commerce and the responsibilities of e-commerce operators in relation to tax liabilities. The Central Goods and Services Tax (GST) Act, 2017, Section 2(44) defines electronic commerce as the supply of goods or services, including digital products, over a digital or electronic network. Further, Section 2(45) of the Central Goods and Services Tax (CGST) Act, 2017 describes an electronic commerce operator as any person who owns, operates, or manages a digital or electronic platform for electronic commerce and Section 9(5) specifies that the government may, via notification, designate categories of services for which tax on intra-state supplies shall be paid by the electronic commerce operator under the Central Goods and Services Tax (CGST) Act, 2017. The AAR Bench examined Rapido’s operations, noting that the company owns and operates a digital platform facilitating the supply of passenger transportation services. The tribunal observed that Rapido fits the definition of an e-commerce operator as it manages a platform that connects drivers with customers. The tribunal noted that Rapido’s app not only generates leads for drivers but also facilitates fare negotiations, shares customer location, and monitors the ride from start to finish. This continuous involvement classifies the service as being supplied through an e-commerce operator, thereby meeting the conditions outlined in Section 9(5) of the CGST Act. The ruling clarified that the ride monitoring fee, which ensures passenger safety during rides, is subject to GST. The AAR stated that Rapido, as an e-commerce operator, must pay 18% GST (9% CGST and 9% SGST) on this fee, with the applicable SAC code being 9985. The authority’s decision means Rapido must account for GST on the services provided by its app, including those offered by independent four-wheeler cab drivers subscribed to the platform. The ruling emphasises the Rapido’s role in the end-to-end provision of transportation services, making it liable for tax under the specified sections of the CGST Act. The AAR confirmed that Rapido satisfies the definition of an e-commerce operator under Section 9(5) of the CGST Act, 2017. The authority ruled that the supply of services by independent four-wheeler cab drivers through the Rapido app constitutes a supply by Rapido. Rapido is liable to pay GST on services provided by the four-wheeler cab service providers using its platform. The applicable GST rate is 18%, with the SAC code 9985 for the ride monitoring fee.

The ruling is as follows:

The Applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualised in Section 9(5) of CGST Act. 2017 r/w notification No 1712017 dated 28.06.2017. The supply by the independent four-wheeler cab service provider (person who has subscribed to ‘Rapido’ app) to his passengers (who do not pay any subscription fee) on the App platform amounts to supply by the Applicant by virtue of Section 9(5) of CGST Act, 2017. The Applicant is liable to pay GST on thc supply of services provided by the independent four-wheeler cab service provider (person who has subscribed to applicant’s ‘Rapido’ app) to his passengers on the Applicant’s app platform, being an e-commerce operator, in terms of Section 9(5) of the CGST Act 2017 read with relevant CGST Rules 2017. 18% GST(9% CGST and 9% SGST) is applicable on the ride monitoring fee and the SAC code 9985 is applicable for the said service. The Applicant is liable to pay GST on the supply of services provided by the independent three/two-wheeler cab service provider (person who has subscribed to applicant’s ‘Rapido’ app) to his passengers on the Applicant’s app platform.

The ruling addressed four-wheelers; however, the principles laid down may impact services involving two-wheelers and three-wheelers. The Karnataka Authority for Advance Ruling (AAR) has determined that Rapido, the leading ride-hailing service, is liable to pay 18% Goods and Services Tax (GST) on its ride monitoring fee. This ruling sets a significant precedent for ride-hailing platforms, clarifying their tax obligations under the Goods and Services Tax framework.

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