GST on subscription-based cab aggregator services — why the govt should simplify, enhance gig workers' earnings

Since inception, we have been pushing back against cab aggregator platforms on their exorbitant commissions and dubious practices. Previously, we had no option but to submit to continuous exploitation since we had purchased the vehicle. But now, a new ride-hailing service based on an innovative subscription model is a ray of hope in our lives.

This model has changed our circumstances instantly — the feature of ‘no payable commissions’ and simply paying an upfront subscription fee means that we earn the entire fare. There are no hidden charges and full transparency. It has boosted our earnings and given us the financial and operational independence we have been seeking for a long time.

Many drivers, in fact, moved from the traditional commission-based model to the subscription model to benefit from the freedom and increased savings. There has been a 20% increase in the number of drivers interested to join ride-hailing services and the overall job opportunities created for the gig economy. But this new ruling under GST Law, that mandates an e-commerce operator is liable for tax on services supplied through its platform, spells a death knell for us again. Let me explain to you how:

Imposing tax on our earnings in a subscription-based model is faulty

Our transactions in the subscription-based model are simple and straightforward. Once we enrol, the platform acts as a lead generator, connecting us to passengers around the city. We choose these rides basis our convenience and on completion of the rides, settlements are direct with us. They do not pass through the platform.

Thus, how can tax be levied on the platform on our earnings? Our transaction with the platform is simply basis the subscription fee and platforms are already paying GST on this amount which is their revenue. Levying tax on our earnings, which does not even go through the platform, is faulty.

Operational freedom will be taken away from us again

One of our biggest grouses with the commission model is the hefty amount being deducted from our earnings (in the range of 30-40%) in the garb of commission. Additionally, so-called ‘forceful’ incentives would kick in only after a certain number of rides that had to be completed in the day. But this was also misused, and we rarely received our due.

For example, if the cab aggregator platform has agreed to provide drivers an incentive after 10 rides, drivers often noticed that reaching this number proved difficult. It was as if the platform was holding out on us so that we were not eligible for the incentive.

In the subscription-based model, there is full transparency in operations - drivers can take as many rides as per their subscription model and have full control over their fares too. Since we choose the passengers basis our convenience and ease of logistical operations, there is no issue of facing penalties for cancelled rides either.

Leverage digital for our benefit, not to our detriment

The commission model pays us later, often with arbitrage and random cuts or penalties. There is no visibility on how to raise issues, it is a tedious process with no human interface, and our earnings get lost in the big corporate aggregator balance sheets. With the subscription platform, we retain full control over all factors. Most importantly, there is no fear of delayed settlements. This model has really given a boost to the driver community, and we should not take away the social good it has done for us.

The best of both worlds

The way I look at it, the subscription model provides us the best of both worlds - with the use of technology we can locate more passengers, complete more rides, and thus enjoy the benefits of a digital economy. And yet, as we always did when we operated offline, we get instant payment at the end of the trip and benefit from 100% fares with no deductions. It really is a win-win for us.

I would urge the GST Council and relevant authorities to sincerely heed our request and allow subscription-based ride-hailing services to continue as is, with no tax imposed on our earnings.