Namma Yatri app exempt from GST collection under Section 9(5) as platform only connects drivers and passengers

AAR Karnataka ruled that while the applicant operating Namma Yatri app qualifies as an Electronic Commerce Operator under CGST Act definitions, it is not liable to collect and pay GST under Section 9(5) read with Notification 17/2017. Despite the app facilitating intra-state passenger transportation by auto-rickshaws (qualifying as motorcabs), the unique business model merely connects drivers and passengers without collecting consideration, controlling service provision, or maintaining operational oversight. The supply occurs independently of the platform, making the individual service providers liable for GST rather than the e-commerce operator.

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Issues Involved:

1. Definition of an e-commerce operator under Section 9(5) of CGST Act, 2017.
2. Whether the supply by the service provider on the Applicant's application amounts to supply by the Applicant.
3. Liability of the Applicant to collect and pay GST on services supplied by the service provider through the Applicant's application.

Summary:

Issue 1: Definition of an e-commerce operator

The applicant, engaged in providing technology services through the "Namma Yatri" app, sought clarity on whether they qualify as an e-commerce operator under Section 9(5) of the CGST Act, 2017. The Authority examined the definitions under Sections 2(44) and 2(45) of the CGST Act and concluded that the applicant, owning and managing the digital platform for the supply of services, fits the definition of an Electronic Commerce Operator (ECO).

Issue 2: Supply by the service provider on the Applicant's application

The applicant argued that their role is limited to providing a platform for auto drivers and passengers to connect, without involvement in the actual supply of services. The Authority reviewed the "Driver's Terms and Conditions" and found that the applicant does not participate in the business transactions between the auto drivers and passengers. Consequently, the supply by the service provider to their customers on the applicant's application does not amount to supply by the applicant.

Issue 3: Liability to collect and pay GST

The applicant contended that they should not be liable to collect and pay GST on the services supplied by the auto drivers through their app, as they do not control the fare, collection, or completion of the ride. The Authority considered the provisions of Section 9(5) of the CGST Act and Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017. It was determined that the applicant's role is limited to connecting the service provider and recipient, without involvement in the actual supply of services. Therefore, the applicant is not liable to collect and pay GST on the services supplied by the service provider through their application.

Ruling:

a. The Applicant satisfies the definition of an e-commerce operator but not 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. The supply by the service provider (person who has subscribed to Namma Yatri) to his customers (who also have subscribed to Namma Yatri) on the Applicant's computer application does not amount to supply by the Applicant.

c. The Applicant is not liable to collect and pay GST on the supply of services supplied by the service provider (person who has subscribed to Namma Yatri) to his customers (who also have subscribed to Namma Yatri) on the Applicant's computer application.

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