Rapido Liable To Pay GST On Services Provided By Independent Four-Wheeler Cab Service Provider: Karnataka AAR
The Karnataka Authority of Advance Ruling has held that the Rapido is liable to pay GST on services provided by independent four-wheeler taxi service providers.The bench of Dr. M.P. Ravi Prasad and Kiran Reddy T has observed that Rapido satisfies the definition of an “e-commerce operator” and the nature of supply as conceptualized in Section 9(5) of CGST Act 2017 read with notification...
The Karnataka Authority of Advance Ruling has held that the Rapido is liable to pay GST on services provided by independent four-wheeler taxi service providers.
The bench of Dr. M.P. Ravi Prasad and Kiran Reddy T has observed that Rapido satisfies the definition of an “e-commerce operator” and the nature of supply as conceptualized in Section 9(5) of CGST Act 2017 read with notification No. 17/2017 dated 28.06.2017.
The applicant stated that it is a registered private limited company, also registered under the GST Act, and is engaged in the business of providing technology-based services to their end users for booking two-wheelers and three-wheeler passenger transport services offered by third-party drivers by means of the company website and the STI mobile app platform Rapido.
The applicant proposes to introduce computer/mobile application services to independent four-wheeler cab service providers on a subscription basis as a discovery platform to enable them to connect with potential end-users who require the services of third-party drivers on its platform. The third-party drivers (subscribers) shall enter into a standard agreement to create a business user account, no furnishing certain documents, which shall be limited to providing a license or permission to use the app.
The applicant also proposes to introduce a pay-per-use ride monitoring fee, which is an optional service provided to the passengers, to ensure the passenger's safety during the ride that the passenger avails from the four-wheeler cab service providers.
The applicant sought the advance ruling on the issue whether the applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualized in Section 9(5) of the CGST Act, 2017 r/w notification No. 17/2017 dated June 28, 2017. Whether the supply by the independent four-wheeler cab service provider (person who has subscribed to the 'Rapido' app) to his passengers (who do not pay any subscription fee) on the app platform amounts to supply by the applicant?
Yet another issue raised was whether the applicant is liable to pay GST on the supply of services provided by the independent four-wheeler cab service provider (person who has subscribed to the applicant's 'Rapido' app) to his passengers on the applicant's app platform.
The advance ruling was sought in respect of the rate at which GST shall be collected on the ride monitoring fee and the SAC code that shall be applicable. Whether the applicant is liable to pay GST on the supply of services provided by the independent three- or two-wheeler cab service provider (person who has subscribed to the applicant's 'Rapido' app) to his passengers on the applicant's app platform.
The applicant contended that they are not involved in the collection of the consideration pertaining to the ride on behalf of the driver. The passenger pays the consideration to the driver directly. Neither the definitions of electronic commerce under Section 2(44) or electronic commerce operator under Section 2(45) nor the charging Section 9(5) of the CGST Act 2017 stipulates that the e-commerce operator has to collect the consideration. Though the contract is between the driver and the passenger and the service is supplied by the driver or passenger, liability to pay tax is fastened on the electronic commerce operator by way of deeming provision in Section 9(5), i.e., "all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services." The supply of service refers to the supply of services by way of transportation of passengers by a radio-taxi, motor cab, maxi cab, and motorcycle, as notified in the Notification 17/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9(5) of the CGST Act, 2017, and supplied through the electronic commerce operator.
The AAR held that the applicant is squarely covered in the definition of electronic commerce operator, and the supply of services by way of transportation of passengers by a radio-taxi, motor cab, maxicab, and motor cycle is supplied through them. By virtue of Section 9(5), the applicant is liable to pay tax on the supply of services for transportation of passengers by a radio-taxi, motor cab, maxi cab, and motorcycle.
The AAR ruled that 18% GST is liable to be collected on the ride monitoring fee and the SAC code that shall be applicable.
Applicant's Name: Roppen Transportation Services