Summary: Roppen Transportation Services Pvt. Ltd. (Rapido) sought clarification from the Karnataka State GST Department on its GST liabilities as an e-commerce operator. According to the Advance Ruling, Rapido qualifies as an e-commerce operator under Section 9(5) of the CGST Act, 2017, since it manages a digital platform for booking cab services. Rapido’s platform connects passengers with independent cab drivers (subscribers), including two-wheeler, three-wheeler, and four-wheeler services. The ruling specifies that the supply of services by independent four-wheeler cab providers via Rapido’s app is considered a supply by Rapido itself, making the company liable for GST on these transactions. Additionally, an 18% GST rate applies to the ride monitoring fee charged by Rapido, classified under the SAC code 9985. Despite Rapido’s claims of operating a commission-free model where drivers pay subscription fees for using the app, the authority concluded that Rapido must collect GST as if it were the supplier. This decision is based on the company’s role in facilitating transactions through its platform, thereby fulfilling the criteria of an e-commerce operator liable for GST on specified services, including cab bookings and ride monitoring features offered to passengers. Also Read: ‘Rapido’ is an E-commerce Operator & liable to GST: Karnataka AAR
Introduction: Authority for Advance Ruling Karnataka held in respect of Advance ruling filed by Roppen Transportation Services Pvt Ltd. (Rapido) that it is liable to pay GST as a E Commerce Operator.
Rapido has approached Karnataka state GST Department for clarification on the following matters:
1. Whether the company satisfies the definition of e-commerce operator?
2. Whether the supply by independent four-wheeler cab service provider( Subscribers to Rapido app) to his passengers, amounts to supply by the Rapido?
3. Whether Rapido is liable to pay GST on the supply of services provided by the independent four-wheeler cab service provider (Subscribers to Rapido app) to his passengers on Rapido’s Application?
4. What is the GST rate which shall be collected on the ride monitoring fee and the SAC Code that shall be applicable?
5. Whether Rapido is liable to pay GST on the supply of services provided by the independent three/ two wheeler cab service providers (Subscribers to Rapido app) to his passengers on Rapido’s Application platform?
Sections Key words mentioned in this ruling:
1. Electronic commerce : It means the supply of goods or services or both, including digital products over digital or electronic network – Section 2(44) of CGST Act, 2017.
2. Electronic commerce operator: It means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce – Section 2( 45) of CGST Act, 2017
3. Supplier : It means in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied – Section 2 (105) of CGST Act, 2017
4. Section 9(5) of CGST Act, 2017: The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
Following are the list of services which are notified by the council
- services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;
- services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.
- Services by way of house-keeping, such as plumbing, carpentering etc.
- Supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises.
Explanation by Applicant (Rapido):
1. The company stated that it is a registered private limited company, which is engaged in the business of providing technology based services to their end users for booking two wheelers and three wheeler passenger transport services offered by third party drivers by means of the company website and its mobile application – “Rapido”.
2. It is proposing to introduce computer/mobile application services to independent four wheeler cab service providers ( Captains) on subscription basis, as a discovery platform to enable them to connect with potential end users( Passengers).
3. It also proposes to introduce pay per use ride monitoring fee which is optional service provided to the passengers, to ensure passenger’s safety.
4. Price of a ride is not determined by applicant, but at the beginning of a ride applicant suggests a range of prices that are basic and prudent which can be charged by captains and which are generally accepted by the passengers.
Company’s Business model
1. Four Wheeler cab service providers enters into a standard agreement with the company, where they should pay subscription fee to company to open their business user account that provides license or permission to use the company’s app.
2. The Company mentioned that the relationship between subscribers to company’s app and passengers is like supplier and recipient relationship and the company is no where related with the contract between subscribers to the app and their passengers.
3. There is no proposed revenue from passenger or consideration towards the ride.
4. The company is engaged in Commission free monetization model and the company is now where related in collection of consideration or any other form of agreed means of payment from the passenger on behalf of subscribers to the company’s app.
5. The company is generating money only through subscription fee from drivers who subscribes the company’s application and it is paying GST on subscription fee collected from drivers.
6. The Main Intention of the Application is to Lead generation for the drivers and discovery of drivers for customers and the applicant clearly mentioned that they are not in the business of rent–a–cab and not registered with Regional transport officer
7. Company is going to introduce pay per use – ride monitoring fee where the company provides services before, during and after the ride in the following ways:
a) Number masking: Non revealing of customer information, contact numbers to ensure safety of customer.
b) Face recognition: Driver partner has to upload their selfie before the ride starts
c) Route deviation: A notification will be sent to passenger whenever there is a deviation in the route is noticed.
d) Long stop: Whenever a vehicle is stationed at a particular point for longer duration than expected, notification will be sent to customer to check if the ride is safe.
e) Sharing ride details: Ride details can be shared to anyone by the passenger.
f) SOS : Emergency call button will be on the app, so that In case of emergency pay per use customer have an option to reach out to emergency response team of Rapido or directly dial to nearest police station.
g) Inter active voice response(IVR) : In case of rides post 10 pm, customer will get one IVR call upon competition of ride.
Ride price determination
1. Price of a ride is not determined by applicant, but at the beginning of a ride applicant suggests a range of prices that are basic and prudent which can be charged by captains and which are generally accepted by the passengers.
2. Here the applicant is not involved in determination of the ride fare. The Applicant can know only the initial price agreed between captain and passenger, which is the price negotiated between captain and passenger.
3. The applicant is not aware of the actual fare paid/ settled by the passenger to captain.
Analysis by Advance Ruling Authority
1. The Advance Ruling Authority after considering all the facts given by Rapido and after taking everything into consideration gave ruling that the Applicant( Rapido) is an Electronic commerce operator as per section 9(5) of CGST Act, as the applicant is providing services via digital platform and satisfying all the requirements in the mentioned section.
2. The Authority also mentioned that all the provisions of section 9(5) is applicable to Applicant and the Applicant is responsible for collection of GST as if he is the supplier for paying the tax.
Ruling
1. The Applicant satisfies the definition of e-commerce operator and the nature of supply as conceptualized in section 9(5).
2. the supply by the independent four wheeler cab service provider to his passenger on the App platform amounts to supply by the Applicant.
3. The Applicant is liable to pay GST on the supply of services provided by four wheeler cab service providers to his passengers.
4. 18% GST is applicable on the ride monitoring fee and the SAC code 9985 is applicable for said service.
5. The Applicant is liable to pay GST on the supply of services provided by the independent three/ two wheeler cab service provider( person who has subscribed to applicant “Rapido” app) to his passengers on the Applicant’s app platform.
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