AAR ruling on cab aggregators not applicable to Ola, Uber : 18-8-2018

The Authority for Advanced Ruling (AAR) in Karnataka has held that fees collected by taxi aggregation service providers from drivers in lieu of IT services would be subject to the GST. However, experts said the ruling would not apply to service providers like Uber and Ola as it was specific to the business model of the applicant – Opta Cabs.

In case of Opta Cabs, the company only provides IT services like billing in lieu of a monthly payment from drivers who use its mobile application. The ruling said the monthly payment made to Opta Cabs would attract GST as it is consideration for a supply.

However, the model is different for Ola and Uber which already comes under the ambit of the GST, and charge 5% tax on the fare amount. The fare is collected by these companies and then is disbursed to cab drivers along with applicable incentives.
In its application for advanced ruling, Opta Cabs said customers pay directly to drivers, whose turnover may not be more than `12 lakh per annum, which exempts them from GST. The revenue threshold for a business is `20 lakh a year, which triggers the GST liability for it.

“The applicant is liable to tax on the amounts billed by him on behalf of the taxi operators for the service provided in the nature of transportation of passengers through it,” the ruling said.

Rajat Mohan, partner at AMRG & Associates, said the ruling is for a particular type of cab aggregation model employed by Opta Cabs, which is different from Uber and Ola.

“Uber and Ola are the primary service providers who take responsibility of cab rides and attend to passengers’ complaints regarding the service. Further, they also collect the fare amount and charge 5% GST on it. However, Opta Cabs only provides the IT services but the main service provider is the cab driver – who is usually outside the ambit of the GST due to low turnover,” Mohan said.

 

Source : Financial Express

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