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What is the story about?
India’s app-based mobility sector has approached the Finance Ministry with an industry representation seeking clarity on the applicability of Section 9(5) of the Central Goods and Services Tax Act, 2017, highlighting what it calls a structural mismatch between the law and emerging platform business models.
The representation argues that the current GST framework, which mandates a 5% tax on ride fares to be collected by e-commerce operators, does not adequately distinguish between traditional cab aggregators and SaaS-based platforms—leading to compliance challenges, higher costs, and regulatory uncertainty.
What Section 9(5) mandates
Section 9(5) of the Central Goods and Services Tax Act, 2017 places the responsibility of collecting and depositing GST on electronic commerce operators facilitating passenger transport services. In effect, platforms—not drivers—are treated as the supplier for tax purposes, and are required to levy 5% GST on each ride.
While this framework has been largely workable for established aggregator models, the industry says its blanket application is now being tested by newer platform structures.
Aggregator vs SaaS: A structural divide
At the heart of the representation is the distinction between two operating models within India’s ride-hailing ecosystem.
Traditional aggregators such as Uber and Ola operate as full-stack platforms. They manage fare discovery, collect payments from riders, and subsequently disburse earnings to drivers after deducting commissions. This control over the transaction flow enables them to comply with GST obligations under Section 9(5).
In contrast, a growing set of platforms—including government-backed initiatives like Bharat Taxi and other app-based services—operate on a SaaS model. These platforms primarily provide digital infrastructure for matching drivers and riders but do not intermediate payments. Instead, fares are settled directly between the driver and the passenger.
It is this lack of control over the financial transaction that, according to the industry, creates a fundamental disconnect with the GST provision.
Why the current GST treatment is being challenged
The industry representation contends that applying Section 9(5) uniformly across both models results in an “impossibility of compliance” for SaaS platforms. Since these platforms do not collect the fare, they are not in a position to discharge GST on the full ride value.
As a result, the tax burden is effectively passed on—either to drivers through reduced earnings or to consumers through higher fares. The industry argues that this runs counter to the objectives of affordability and gig economy formalisation that digital mobility platforms were meant to advance.
The issue is further compounded by conflicting rulings from the Authority for Advance Ruling across states. While some rulings have interpreted Section 9(5) broadly to include SaaS-based platforms, others have taken a narrower view. This divergence has led to legal challenges and a lack of uniformity in tax treatment, leaving platforms in a state of uncertainty.
Impact on drivers, riders and platform economics
The representation underscores that the current ambiguity is already affecting the economics of the ride-hailing ecosystem.
For drivers, who typically operate on thin margins, any additional tax burden reduces take-home income. For riders, it translates into higher fares, particularly in price-sensitive markets such as Tier-2 and Tier-3 cities where app-based mobility has been a key enabler of last-mile connectivity.
Also Read: Rising food adulteration cases in India: How FSSAI is facing fire for deteriorating case studies
At the platform level, SaaS operators face disproportionate compliance risks compared to aggregator models that have clearer tax treatment. This, the industry argues, creates an uneven playing field and may discourage the growth of alternative, low-cost mobility solutions.
What the industry is asking for
Through its representation, the industry has urged the Finance Ministry and the GST Council to re-examine the applicability of Section 9(5) in light of evolving business models.
Specifically, it has called for a clear distinction between aggregator-led and SaaS-based platforms, and has sought an exemption or carve-out for platforms that do not control payment flows. The underlying argument is that tax liability should align with the entity that actually handles the transaction, rather than being imposed uniformly based on platform classification.
Vivek Krishna, VP - Finance, Rapido says, "In subscription-led, zero-commission models, platforms function purely as technology providers, enabling discovery between riders and driver-partners, with fares negotiated and settled directly. Applying GST on ride fares in such cases creates a structural inconsistency with the intent of the law, and is not viable to enforce by platforms as they neither set prices nor collect payments."
He added, "At a time when subscription based models are improving driver autonomy and supporting more equitable earnings, this can affect driver-partners’ take-home earnings and make everyday mobility more expensive for consumers. In this context, we echo driver-partners' concerns by requesting for clarification that discovery-only ride hailing platforms under subscription models are not covered under Section 9(5) of GST, so that the framework aligns with evolving ground realities while supporting driver welfare and consumer affordability."
A broader policy inflection point
The issue raises a larger question for policymakers: whether India’s GST framework is sufficiently agile to accommodate rapidly evolving digital business models.
As platform economies continue to diversify beyond traditional aggregator structures, the outcome of this debate could set a precedent for how similar models are treated across sectors. For the ride-hailing industry, clarity on Section 9(5) is not just a tax issue—it is increasingly becoming central to pricing, competitiveness, and the future trajectory of app-based mobility in India.
Also Read: FMCG growth steady for now, price hikes may help but demand and costs remain a worry: Abneesh Roy
The representation argues that the current GST framework, which mandates a 5% tax on ride fares to be collected by e-commerce operators, does not adequately distinguish between traditional cab aggregators and SaaS-based platforms—leading to compliance challenges, higher costs, and regulatory uncertainty.
What Section 9(5) mandates
Section 9(5) of the Central Goods and Services Tax Act, 2017 places the responsibility of collecting and depositing GST on electronic commerce operators facilitating passenger transport services. In effect, platforms—not drivers—are treated as the supplier for tax purposes, and are required to levy 5% GST on each ride.
While this framework has been largely workable for established aggregator models, the industry says its blanket application is now being tested by newer platform structures.
Aggregator vs SaaS: A structural divide
At the heart of the representation is the distinction between two operating models within India’s ride-hailing ecosystem.
Traditional aggregators such as Uber and Ola operate as full-stack platforms. They manage fare discovery, collect payments from riders, and subsequently disburse earnings to drivers after deducting commissions. This control over the transaction flow enables them to comply with GST obligations under Section 9(5).
In contrast, a growing set of platforms—including government-backed initiatives like Bharat Taxi and other app-based services—operate on a SaaS model. These platforms primarily provide digital infrastructure for matching drivers and riders but do not intermediate payments. Instead, fares are settled directly between the driver and the passenger.
It is this lack of control over the financial transaction that, according to the industry, creates a fundamental disconnect with the GST provision.
Why the current GST treatment is being challenged
The industry representation contends that applying Section 9(5) uniformly across both models results in an “impossibility of compliance” for SaaS platforms. Since these platforms do not collect the fare, they are not in a position to discharge GST on the full ride value.
As a result, the tax burden is effectively passed on—either to drivers through reduced earnings or to consumers through higher fares. The industry argues that this runs counter to the objectives of affordability and gig economy formalisation that digital mobility platforms were meant to advance.
The issue is further compounded by conflicting rulings from the Authority for Advance Ruling across states. While some rulings have interpreted Section 9(5) broadly to include SaaS-based platforms, others have taken a narrower view. This divergence has led to legal challenges and a lack of uniformity in tax treatment, leaving platforms in a state of uncertainty.
Impact on drivers, riders and platform economics
The representation underscores that the current ambiguity is already affecting the economics of the ride-hailing ecosystem.
For drivers, who typically operate on thin margins, any additional tax burden reduces take-home income. For riders, it translates into higher fares, particularly in price-sensitive markets such as Tier-2 and Tier-3 cities where app-based mobility has been a key enabler of last-mile connectivity.
Also Read: Rising food adulteration cases in India: How FSSAI is facing fire for deteriorating case studies
At the platform level, SaaS operators face disproportionate compliance risks compared to aggregator models that have clearer tax treatment. This, the industry argues, creates an uneven playing field and may discourage the growth of alternative, low-cost mobility solutions.
What the industry is asking for
Through its representation, the industry has urged the Finance Ministry and the GST Council to re-examine the applicability of Section 9(5) in light of evolving business models.
Specifically, it has called for a clear distinction between aggregator-led and SaaS-based platforms, and has sought an exemption or carve-out for platforms that do not control payment flows. The underlying argument is that tax liability should align with the entity that actually handles the transaction, rather than being imposed uniformly based on platform classification.
Vivek Krishna, VP - Finance, Rapido says, "In subscription-led, zero-commission models, platforms function purely as technology providers, enabling discovery between riders and driver-partners, with fares negotiated and settled directly. Applying GST on ride fares in such cases creates a structural inconsistency with the intent of the law, and is not viable to enforce by platforms as they neither set prices nor collect payments."
He added, "At a time when subscription based models are improving driver autonomy and supporting more equitable earnings, this can affect driver-partners’ take-home earnings and make everyday mobility more expensive for consumers. In this context, we echo driver-partners' concerns by requesting for clarification that discovery-only ride hailing platforms under subscription models are not covered under Section 9(5) of GST, so that the framework aligns with evolving ground realities while supporting driver welfare and consumer affordability."
A broader policy inflection point
The issue raises a larger question for policymakers: whether India’s GST framework is sufficiently agile to accommodate rapidly evolving digital business models.
As platform economies continue to diversify beyond traditional aggregator structures, the outcome of this debate could set a precedent for how similar models are treated across sectors. For the ride-hailing industry, clarity on Section 9(5) is not just a tax issue—it is increasingly becoming central to pricing, competitiveness, and the future trajectory of app-based mobility in India.
Also Read: FMCG growth steady for now, price hikes may help but demand and costs remain a worry: Abneesh Roy
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