GST tangle deepens: Food delivery faces 18% levy, ride-hailing apps still in grey zone

The Goods and Services Tax (GST) Council’s latest decision has brought sweeping clarity for one sector — and lingering uncertainty for another. At its 56th meeting last week, the Council recommended an 18% levy on local delivery services offered through e-commerce operators (ECOs) such as Zomato and Swiggy. This charge comes on top of the 5% GST already collected by these aggregators on behalf of restaurants.

The move effectively makes food deliveries more expensive for customers, as platforms are expected to pass on the additional tax burden. Zomato and Swiggy, however, have pushed back, arguing that delivery services are technically provided by their gig partners — not the platforms themselves.

Meanwhile, ride-hailing apps remain caught in a web of ambiguity. Players such as Uber, Ola and Rapido are still awaiting clarity on whether GST applies to passengers under the subscription model, where drivers pay 18% GST on weekly or daily platform fees instead of surrendering commissions on every ride.

The question is critical. In the older commission model, passengers were charged 5% GST on fares. But under the subscription model, fares are settled directly between riders and drivers — often in cash or via UPI — while apps simply charge drivers a periodic access fee. This shift has attracted drivers with its predictable costs and lured passengers with cheaper rides.

Yet, the tax liability remains contested. The Karnataka bench of the Authority for Advance Ruling (AAR) ruled in November 2024 that Uber must still collect 5% GST from passengers, even when it does not process payments. A year earlier, the same bench had ruled in favour of Namma Yatri, holding that it was not required to collect GST since it only facilitated connections between drivers and riders.

The conflicting verdicts have left ride-hailing apps in limbo, even as the subscription model gains rapid ground. Namma Yatri, developed by Juspay Technologies with the Bengaluru Auto Rickshaw Drivers’ Union, pioneered the model for autos in 2023 before expanding to cabs in 2024. Rapido followed with similar plans, while Ola extended its subscription service to major metros this year. Uber, still dominant in the cab segment, adopted the model for autos in February but has yet to roll it out for cars — a move many see as imminent amid intensifying competition.

For India’s booming mobility sector, the stakes are high. While food delivery customers brace for costlier meals, ride-hailing passengers and drivers remain uncertain about their tax obligations. Until a uniform GST framework emerges, the industry will continue to operate in a grey zone — one that could determine the future economics of app-based transport in India.