The Karnataka Authority for Advance Ruling ruled that Rapido is liable to pay 18% GST on ride monitoring fee.
The Authority observed that the core issue to decide is whether the applicant qualifies to be an e-commerce operator or not and whether they are liable to discharge tax liability in terms of Section 9(5) of the CGST Act 2017.
The bench proceeded to examine the said issue and in this regard.
The Section 2(44), 2(45) and 9(5) of the CGST Act 2017, which are as under:
2(44) -electronic commerce means the supply of goods or services or both, including digital products over digital or electronic network;
2(45) -electronic commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce
9. Levy and collection.
(5) 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.
The bench stated that it could be inferred from the definitions that Electronic Commerce Operator (ECO) means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce i.e. for the supply of goods or services or both, including digital products over digital or electronic network.
The authority said that in the instant case the applicant owns a digital platform (‘Rapido’ APP), for the supply of services. Thus the applicant squarely fits into the definition and qualifies to be an Electronic Commerce Operator.
In the instant case the bench observed that the services of transportation of passengers are provided by a four-wheel car, which is a motor vehicle adapted to carry maximum four passengers excluding driver and thereby it can carry not more than six passengers excluding the driver and hence qualifies to be a “motorcab”.
The authority invited its reference to the Merriam Webster dictionary, in accordance to which the word through’ is used as a function word to indicate means, agency, intermediacy such as by means of, by the agency of etc. The word ‘through’ is also used as a function word to indicate extent, period of time such as during entire period, from the beginning to the end, to and including etc. Thus the word through in the phrase services supplied through electronic commerce operator, in Section 9(5), gives the meaning that the services are to be supplied by means of/ by the agency of/ from beginning to the end /during entire period by e-commerce operator.
The bench observed that the App not only generates leads about customers to the drivers, but also provides a platform for fare negotiation between the customer and driver. Once ride fare is finalized, the location of customer & pick up point is shared by the App; start of ride, route taken for ride, end of ride are captured and notified to customer by the App. Thus effectively the services of transportation of passenger by the driver is supplied through the Applicant’s App/portal from beginning to end and during the entire period of the ride. Thus the third condition that the services are supplied through electronic commerce operator is also satisfied.
The bench found that the applicant is squarely covered in the definition of electronic commerce operator and the supply of services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle is supplied through them. Further, by virtue of Section 9(5) the applicant is liable to pay tax on the supply of the services of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle.
The bench ruled that the Applicant is liable to pay GST on the supply of services provided by the independent four-wheeler cab service provider (person who has subscribed to applicant’s ‘Rapido’ app) to his passengers on the Applicant’s app platform, being an e-commerce operator, in terms of Section 9(5) of the CGST Act 2017 read with relevant CGST Rules 2017.
It further added that 18% GST(9% CGST and 9% SGST) is applicable on the ride monitoring fee and the SAC code 9985 is applicable for the said service.
Issue Raised
a. Whether the Applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualized in Section 9(5) of CGST Act, 2017 r/w notification No 17/2017 dated 28.06.2017?
b.Whether the supply by the independent four-wheeler cab service provider (person who has subscribed to ‘Rapido’ app) to his passengers (who do not pay any subscription fee) on the app platform amounts to supply by the Applicant?
c. Whether the Applicant is liable to pay GST on the supply of services provided by the independent four-wheeler cab service provider (person who has subscribed to applicant’s ‘Rapido’ app) to his passengers on the Applicant’s app platform?
d.What is the rate at which GST shall be collected on the ride monitoring fee and the SAC code that shall be applicable?
e. Whether 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’s ‘Rapido’ app) to his passengers on the Applicant’s app platform?
Facts
The applicant, Roppen Transportation Services, stated that they are a registered private limited company, also registered under the GST Act and are 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 app platform “Rapido”.
The applicant proposes to introduce computer/mobile application services to independent four-wheeler cab service providers on subscription basis, as a discovery platform to enable them to conrfect with potential end-users (also referred to as passengers), who require the services of such third-party drivers on its platform. The third party drivers (subscribers) shall enter into a standard agreement to create a business user account, on furnishing certain documents. which shall be limited to providing of license or permission to use the said app. The applicant also proposes to introduce pay per use ride monitoring fee, which is an optional service provided to the passengers, to ensure the passenger’s safety during the ride that the passenger avails from the four-wheeler cab service providers.
Case Information
Case Name: Roppen Transportation Services
Judicial Level & Location : Karnataka AAR
Case Number : Advance Ruling No. KAR ADRG 36/2024
Date of Ruling : 24/07/2024
Ruling in favor of: Applicant
Members: Dr. M.P. Ravi Prasad, Additional Commissioner of Commercial Taxes Member (State) and Sri. Kiran Reddy T Additional Commissioner of Customs & Indirect Taxes, Member (Central)