Hyderabad, June 10: A new report released by Esya Centre, Balancing Efficiency and Equity: Evidence From India’s Technology-Intermediated Transport Services Under The GST Regime, finds that applying GST liability under Section 9(5) of the CGST Act to subscription-based ride-hailing platforms could be both legally problematic and practically impossible to implement, while imposing significant costs on drivers and consumers.
The study, based on a survey of 1,044 drivers and 1,059 passengers across 13 Indian cities, examines the growing Software-as-a-Service (SAAS) model used by ride-hailing platforms which operates as a discovery-only lead generation model, where drivers pay a fixed subscription fee to access a platform but independently determine fares, collect payments, and retain the entire ride fare.
Unlike traditional commission-based aggregators, SAAS platforms neither determine ride prices nor process payments. As a result, the report argues that imposing GST liability ride fares under subscription-based platforms under Section 9(5) creates a fundamental implementation challenge, particularly in cases where the transportation service is provided independently by drivers, many of whom may not fall within the GST registration threshold. The report also highlights that conflicting Advance Ruling Authority decisions across states have created significant uncertainty, with functionally identical business models receiving different tax treatment. This ambiguity, researchers argue, undermines tax neutrality and creates uneven competitive conditions within India’s digital mobility sector.
Commenting on the findings, Meghna Bal, Director, ESYA Centre, said: “India’s mobility sector is evolving rapidly, and newer platform models are creating greater flexibility and choice for both drivers and consumers. Our research indicates that subscription-led models are gaining traction because they offer greater earning predictability and transparency for drivers while continuing to support affordable mobility for consumers. As these models scale, it is important that regulatory and taxation frameworks evolve in step with innovation.”
Commenting on the findings, Jayashree Parthasarthy, Tax Partner, EY, said: “The evolution of digital mobility platforms is prompting a re-examination of how indirect tax frameworks are applied to new-age business models. As platform structures move towards subscription, there is a need to ensure that tax interpretations remain aligned with these models. The intersection of technology, mobility, and taxation is still evolving, and policy frameworks will need to keep pace with innovation.”
Drivers Expect Earnings Losses and Reduced Participation
The study finds overwhelming support among drivers for subscription-based platforms. However, if GST liability were imposed on ride fares under Section 9(5):
- More than three-quarters of drivers expect negative impacts on their livelihoods.
- Four out of five affected drivers anticipate lower take-home earnings.
- Nearly 60 percent expect fewer bookings.
- Around 45 percent fear losing customers due to higher prices.
- Approximately 40 percent indicate they would increase informal or off-platform rides.
- More than half of drivers indicate they would increase non-platform rides or reduce platform participation.
Consumers Face Higher Costs and Reduced Mobility
The research also reveals substantial consumer sensitivity to fare increases. The impact would be particularly severe for women, lower-income users, and those who rely on ride-hailing services for late-night travel, emergency trips, and access to employment.
- Nearly 68 percent of passengers report they would reduce their use of app-based ride services if fares increased by just 5 percent.
- Half of surveyed passengers say they would consider switching back to traditional taxis if costs rise.
- Nearly nine in ten passengers rate platform safety features as very or extremely important.
Call for Clarification Under Section 9(5)
The findings come at a time when policymakers and industry stakeholders are exploring new approaches to strengthen driver livelihoods and expand mobility access. Initiatives such as Bharat Taxi reflect a broader shift towards driver-centric mobility models that seek to improve earnings transparency and economic participation. To address the concerns, ESYA Centre recommends that GST liability under Section 9(5) be clarified to apply only where platforms exercise control over fare determination or fare collection. The report also calls for explicit clarification that safety, monitoring, and verification functions mandated by transport regulations should not be treated as evidence of transactional control for GST purposes.