E-commerce firm not liable to pay GST on cab service by third parties: AAR

Experts say Karnataka authority's ruling would not apply to Uber, Ola and other cab aggregators

The Karnataka authority for advance rulings (AAR) has held that an e-commerce player without control over drivers and passengers will not pay the goods and services tax (GST) on cab services provided by third parties.

Experts said that the ruling will not apply to cab aggregators Uber and Ola, as the companies have different business models.

Multi-Verse Technologies Pvt Ltd, which is engaged in the business of providing services by way of computer software application services to connect sellers and the buyers, submitted to the AAR that there is no involvement of the company in either arranging the supply of services from the members or arranging for the payment from buyers.

Suppliers of services can register as business users and buyers as individual users on an app.

The AAR observed that the app allows the passengers to identify nearby vehicles. The company does not have control over the ride, and does not collect fare from customers. Further, the company is not responsible to the customers for any kind of deficiency.

AAR held that the company is an electronic commerce operator, but it is not liable to discharge the tax liability.

Sandeep Sehgal, partner tax at AKM global, said aggregators such as Ola, Uber and Rapido would not benefit from this ruling as their model entails collection of fee and significant control over the service terms and quality. As such they would continue to pay GST on a reverse charge basis, he said.