GST

Uber India files a Case against levy of GST on App-based Auto rides

Uber India files a Case against levy of GST on App-based Auto rides

Auto rickshaw rides booked through app aggregators such as Ola and Uber India are set to become more expensive beginning from January 1, 2022, with the Union government deciding to levy a 5% GST on these online bookings.

Levy of GST on Auto rickshaw rides

Demanding that the move be reconsidered, Uber India believes that, while they understand the need for the government to collect the revenues, they have urged the authorities to reconsider this tax, which will have an impact on auto drivers’ earnings as well as the government’s agenda of digitization.

The Union government has declared that beginning from January 1, 2022, it will levy a 5% GST on auto rides booked online, effectively ending an existing exemption. Auto rides on the street will continue to be GST-free though. Hence, it has been strongly urged before the Government to reinstate the GST exemption for online auto products in the ride-sharing industry so that riders, drivers, and cities can continue to benefit from the sector’s growth.

Uber India files a Case: Facts of the case

Uber, the e-commerce platform, has filed a case in the Delhi High Court challenging the imposition of GST on Auto Rickshaw services booked through the e-commerce platform. The case filed by Uber is in the name of Uber India Systems Private Limited Versus Union of India & ANR. (Delhi High Court).

According to the Petitioner (i.e., Uber India Systems Private Limited), Notification No. 16/2021-CT (Rate) & Notification No. 17/2021-CT (Rate), both dated November 18, 2021, have made amendments to the parent notifications, namely Notification No. 12/2017 and Notification No. 17/2017, in order to levy a GST on the supply of passenger transportation services via an “electronic commerce operator” and those provided by an auto-rickshaw. The petitioner has claimed that the said notifications are ultra vires the Constitution of India as being unreasonable, arbitrary, or violative of the Articles 14, 19(1)(g) & 21 of the Constitution of India.

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The petitioner further goes on to state that the debatable notifications will go into effect on January 1, 2022, and that if an auto-driver registers with an e-commerce operator like that of the petitioner (i.e., Uber India) and provides transportation of passenger services to passengers identified through such e-commerce platform, then GST at 5% or 12% will become applicable on the fare collected on such passenger transport services via auto-rickshaws, even if an auto ride through an offline mode of transport such as street hailing of an auto is free and not liable to GST.

The Petitioner contends that the contested notifications violate Article 14 of the Indian Constitution[1] because they fail to meet the test of reasonable classification. He claims that no distinction in tax treatment can be made between passenger transport services delivered by auto drivers facilitated through e-commerce platforms and passenger transport services delivered by auto drivers offline.

Impact on industry

Not only Uber, but other aggregator cab operators are collectively urging the Government to reconsider this decision. They are of the view that it might lead to lesser demand from passengers for app-based auto rickshaws.

This happens at a time when customers are already complaining about auto-rickshaws and cabs booked through Uber and Ola refusing to pick them up. When it comes to reserving online auto-rickshaws, drivers frequently reject them or call up consumers beforehand who book through an aggregator app.

Uber issued a statement indicating that lakhs of auto drivers in India rely on Uber and other apps to make a living for them. On the other hand, riders, particularly women and the elderly, prefer to book an Auto via an aggregator app not only because of the safety and convenience it provides, but they also value affordability.

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Uber India believes that this tax will result in an increase in platform fares and a corresponding decrease in demand. Riders and drivers will both suffer as a result of this scenario. Furthermore, there are doubts about whether this tax would then result in actual revenue gains for the government or not. As demand shifts to street hail, the revenue from selectively applying GST to online bookings is likely to be marginal at the best.

According to the aggregators, this change will have a direct impact on e-commerce companies that provide an online platform for connecting with riders to a significant number of auto-rickshaw drivers. The tax will create an uneven playing field and is incompatible with the vision of digitization of services, products, and payments.

Takeaway

Booking an auto-rickshaw ride through Uber or Ola might become more expensive effective from January 1, 2022. The government intends to levy an additional 5% GST on bookings made through auto rickshaw apps. The operators of aggregator cabs are pleading with the government to reinstate this decision. They are concerned that this will reduce passenger demand for app-based auto rickshaws.

Read our article:Changes in GST rates effective from 1st January 2022

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