Uber, other apps seek govt clarity over GST liability for their business

Move comes after Karnataka AAR exempts Namma Yatri from GST, citing its role as mere intermediary between auto drivers and customers

A number of app-based ride-hailing services, including Uber, have approached the Union Finance Ministry, the Goods and Services Tax (GST) Council, and the Authority for Advance Rulings (AAR) to determine their tax liability. This action, according to a report by The Economic Times (ET), follows a decision by the Karnataka AAR, which ruled that Bengaluru-based direct-to-driver app Namma Yatri is not required to pay GST.

In the case of Justpay Technologies, which operates the Namma Yatri app, the Karnataka AAR upheld the dictionary meaning of the word "through", stating that "simply linking service providers with customers via a digital platform does not constitute a supply or service”. Consequently, Namma Yatri was exempted from paying the GST.

The Karnataka AAR clarified that Namma Yatri's role is solely to connect auto drivers with passengers, with its involvement ending once the connection is established. However, the recent decision has left the stakeholders confused as the same AAR issued a contradictory ruling in the case of Karnataka-based Opta Cabs.

Similarly, in another ruling involving Balat Enterprises, the Tamil Nadu AAR noted that connecting small business owners with customers qualifies as a service, obligating Balat Enterprises to pay tax.

In light of the recent Karnataka AAR decision, several app-based mobility providers are seeking clarity on their tax obligations. According to ET, Uber has submitted an application for an advance ruling in Karnataka to seek clarity on GST laws. Additionally, the cab aggregator has urged the Union Finance Ministry and the Karnataka GST authorities to provide guidance and resolution regarding the taxation of their services.

Since January 1, 2022, the GST rate on cab services is 5 per cent. However, service providers can opt to pay GST at 12 per cent and take benefit of availing full input tax credit.