GST ON TAXI AGGREGATION SERVICES

[Dr. Sanjiv Agarwal]

What shall be the liability of electronic commerce (e-commerce) operator where it provides the services of taxi aggregation, i.e. assessee providing a mobile application to both-taxi operators and customers ? This issue has been dealt with by Authority for Advance Ruling (AAR), Karnataka as well as its Appellate Authority in the case of OPTA Cabs Pvt. Ltd.

Advance Ruling

In Re: OPTA Cabs Pvt. Ltd. 2018 (8) TMI 933 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA ;  advance ruling was sought on taxability of transportation of passengers on behalf of taxi operators.

The applicant proposed to operate a taxi aggregation service wherein he would be providing a mobile application to both the customers and the taxi operators.  The billing was to be done in the name of the taxi driver who provides the service for the particular trip and the taxi driver would collect the amount from the customer on the completion of the trip. The applicant would not collect the amount on behalf of the taxi driver.

It was submitted that it will not be collecting any charges including trip commission, but only collect service charges for usage of IT services which he would have provided from his end, i.e., Mobile App and Billing related services. Customers pay directly to the drivers. He would not be collecting any application usage charges from the consumers of the taxi service and the consumers would be sent an invoice for the usage of the taxi service from his software application and the amount so billed would be payable by the consumer to the taxi operator on which he proposes to have no control over the payment. The consumer would book the taxi on his application and the taxi operator would be intimated about the potential customer and on usage, he would be billed by the applicant on behalf of the taxi operator.

According to law as per [section 9(5)], tax on intra-State supplies shall be paid by the electronic commerce operator if such services are supplied through it, and all provisions of 2017 act shall apply to such electronic commerce operator as if he is the supplier liable to pay tax in relation to the supply of such service.  Further, Notification No. l7/2017 - Central Tax (Rate), dated 28-6-2017 notifies the services by way of transportation of passengers by a radio-taxi, motor cab, maxi cab 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 section 9(5).

A conjoint reading of the above provisions, makes it clear that the electronic commerce operator shall be liable to pay tax on the services provided by a motor can or maxi cab or motor cycle 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 supplier 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 Ruling, thus was that the applicant is liable to tax on the amounts billed by him on behalf of the taxi operators for the service provided in the nature of transportation of passengers through it, in accordance with the provisions of section 9(5) read with Notification No. 17/2017 - Central Tax (Rate), dated 28.6.2017.

Appellate Ruling

Aggrieved by the advance ruling, M/s OPTA Cabs approached the Appellate Authority for Advance Ruling (AAAR), Karnataka.

According to the facts –

• The OPTA provides mobile application to both, drivers as well as customers to integrate both of them on a single platform, wherein services are provided by the driver to the customer without any intercession by OPTA.
• OPTA is an IT platform whereby services of information technology are provided to the drivers against a prepaid monthly subscription. These charges are irrespective of the trips made or income earned by taxi drivers. OPTA has a policy of not charging any trip commission to taxi drivers.
• Taxi charges are directly paid by the customer to driver either by way of Cash or E-payment or E-Wallets of driver. OPTA shall provide a receipt of the total ride fee payable by customer at the end.

Further, OPTA model services of taxi are not supplied through it, due to following reasons:

• There is no privy of contract on account of payment between OPTA and customer. Customers pay directly to taxi drivers; and
• OPTA does not charge any trip commission from taxi drivers. Thereby there is no flow of consideration on account of any particular trip undertaken by the said taxi driver. OPTA charges monthly rentals to taxi driver for usage of IT platform. The responsibility of OPTA is limited to providing a stable and fully functional IT platform to taxi drivers, and provision of taxi driver services is the sole responsibility of taxi drivers for which no part of income accrues to OPTA.
• OPTA does not ensure any work to any taxi driver, neither does it offer any incentives for completing particular value of transactions in limited time.

The appeal was preferred on the following grounds:

1. The Advance Ruling Authority has erred in holding that GST is leviable on the amounts billed by OPTA on behalf of the taxi operators for the services provided in the nature of transportation of passengers through it and is without consideration of the facts of the case and applicant’s interpretation of law.
2. The ruling is unable to appreciate the words used in section 9(5) of CGST Act, 2017 - ‘such services are supplied through it’. Section 9(5) makes it amply clear that the notification would be applicable in the scenario only when “such services are supplied through it’ and the provisions of this section would not be applicable in case services are not supplied through it. It failed to make a distinction between such services being ‘supplied’ through it as against such services being ‘booked’ through it. In case of the words ‘supplied’, there has to be a ‘continuous link’ of provision of service from start to end and there should be complete responsibility of the deemed supplier.

The AAAR observed that the short point for determination was whether the OPTA is an e-commerce operator and if so, whether he is liable to pay tax on the service supplied through it in terms of Section 9(5) of the CGST Act ?

The AAAR observed that OPTA owns and operates the IT platform for the supply of service of transportation of passengers over the digital network. Using this digital network facility the OPTA provides the taxi aggregation service wherein they connect both the customer as well as the taxi operator. The customer would book the taxi by using the IT platform provided by OPTA and the taxi operator would be intimated about the potential customer through the same IT platform. Finally, on completion of the service, OPTA sends an invoice to the customer through the digital network facility which is payable by the consumer to the taxi driver. Therefore OPTA  is an ‘electronic commerce operator’ in terms of the definition in Section 2(45) of the CGST Act, 2017.

Further vide Notification No. 17/2017-CT (Rate) dated 27.07.2017, the services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle were notified as the category of services, the tax on intra-State supplies of which shall be paid by the electronic commerce operator.

Section 9(5) of the CGST Act, 2017 shifts the liability to pay the tax from the actual supplier of the notified services to the e-commerce operator. The provisions of Section 9(5) of the CGST Act, 2017 do not in any way imply that the supplier of the service is the e-commerce operator. Only the liability to pay the tax is now cast upon the e-commerce operator. The supply of the service of transportation of passengers continues to be that of the taxi operators. However, since the service is supplied by them through the e-commerce platform, the liability to pay the tax is cast upon the e-commerce operator by virtue of Notification No 17/2017 CT(R) dated 28.06.2017.

It observed that the supply of the service of transportation of passengers has been provided ‘through’ the digital platform and by virtue of the provisions of Section 9(5) of the CGST Act, 2017, the e-commerce operator (the one who manages and operates the digital platform) is the person who is liable to pay the tax on all intra-state supplies as if he is the supplier. The electronic commerce operator shall be liable to pay tax on the services provided by a motor cab or maxi cab or motor cycle 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 the supplier in such cases.

The AAAR did not accept the arguments of OPTA that taxi services are merely booked through it and not supplied thought it. It did not agree not e-commerce operate is not receiving the amount from customer. It was not relevant whether the consideration is paid to e-commerce operator or to the service provider for tax liability. The AAAR upheld the ruling pronounced by the AAR and dismissed the appeal. Thus, services of transportation of passengers supplied through the assessee’s electronic platform and digital network were held to be liable in the hands of appellant, OPTA Cabs. [In Re: OPTA Cabs Pvt. Ltd.  2018 (12) TMI 711 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA ; ].