The Authority for Advance Ruling (AAR), Karnataka has held that the money paid by the customer to the driver of the cab for the services of the trip is liable to Goods and Services Tax (GST).
The applicant to operate a taxi aggregation service wherein he would be providing a mobile application to both the customers and the taxi operators. The applicant stated that the billing is done in the name of the driver who provides the service for the particular trip and the taxi driver would collect the amount from the customer on completion of the trip. The applicant does not collect the amount on behalf of the taxi driver and is not collecting any charges, including trip commission, but only collects service charges for usage of IT services such as mobile app and billing related services.
The authority noted that the services of transportation of passengers is supplied to the consumers through the applicant and by virtue of this provision, it shall be deemed that the applicant would be deemed to be the supplier liable to pay tax in relation to the supply of such service by the taxi operator.
Notification No.17/2017 – Central Tax (Rate) dated 28th June, 2017 notifies the services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle as the category of services, the tax on intra-State supplies on which shall be paid by the electronic commerce operator as per the provisions of sub-section (5) of section 9 of the Central Goods and Services Tax Act, 2017.
Analyzing the provisions of the CGST Act, the authority said that the electronic commerce operator shall be liable to pay tax on the services provided by a motor cab or maxi cab or motorcycle or radio-taxi, by way of transportation of passengers, if such services are supplied through it and it shall be deemed that the electronic commerce operator is deemed to be supplied in such cases.
“There is no doubt that the services of transportation of passengers is supplied to the consumers through the applicant and by virtue of this provision, it shall be deemed that the applicant would be deemed to be the supplier liable to pay tax in relation to the supply of such service by the taxi operator,” the authority said.
The ruling would have a great impact on the e-commerce taxi operators like Ola and Uber in India.
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