Uber and various other app-based ride-hailing services have sought clarification from the Union Finance Ministry, the Goods and Services Tax (GST) Council, and the Authority for Advance Rulings (AAR) regarding their tax liabilities. This move, as reported by The Economic Times (ET), follows a ruling by the Karnataka AAR exempting the Namma Yatri app from GST.
In the case of Justpay Technologies, which operates Namma Yatri, the Karnataka AAR interpreted the term “through” to mean that merely linking service providers with customers via a digital platform does not constitute a taxable supply or service. Thus, Namma Yatri was not required to pay GST, as its function is limited to connecting auto drivers with passengers and ends once this connection is made.
However, this ruling has caused confusion among stakeholders due to contradictory decisions from the same AAR in other cases. For instance, the Karnataka-based Opta Cabs received a different ruling, and in another instance, the Tamil Nadu AAR ruled that connecting small business owners with customers qualifies as a service, obligating Balat Enterprises to pay GST.
In response to these inconsistent rulings, several app-based mobility providers are seeking clear guidance on their GST obligations. Uber has taken proactive steps by submitting an application for an advance ruling in Karnataka to clarify the GST laws applicable to its operations. The company has also appealed to the Union Finance Ministry and Karnataka GST authorities for definitive guidance on the taxation of their services.
Since January 1, 2022, the GST rate on cab services stands at 5 percent. Service providers, however, have the option to pay GST at 12 percent and avail of the full input tax credit.
This situation underscores the pressing need for uniform and clear tax regulations for app-based services to ensure compliance and avoid any legal ambiguities.
Views: 3