Rapido app deemed e-commerce operator under Section 2(45) CGST Act, liable for GST on transportation services

The Karnataka AAR ruled that Rapido app qualifies as an e-commerce operator under Section 2(45) of CGST Act, 2017, as it owns a digital platform facilitating transportation services. The Authority held that services provided by independent cab service providers (four-wheelers, three-wheelers, and two-wheelers) through Rapido's platform constitute supply through an electronic commerce operator under Section 9(5). Despite passengers paying drivers directly rather than through the app, Rapido remains liable to pay GST on transportation services supplied through its platform, as the law doesn't mandate e-commerce operators to collect consideration directly.

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Issues Involved:
1. Definition of an e-commerce operator and applicability under Section 9(5) of the CGST Act, 2017.
2. Supply by independent four-wheeler cab service providers and its attribution to the applicant.
3. Applicant's liability to pay GST on services provided by independent four-wheeler cab service providers.
4. GST rate and SAC code applicable to the ride monitoring fee.
5. Applicant's liability to pay GST on services provided by independent three/two-wheeler cab service providers.

Detailed Analysis:

1. Definition of an E-commerce Operator and Applicability under Section 9(5) of the CGST Act, 2017:
The applicant operates a digital platform ("Rapido") that connects independent four-wheeler cab service providers with potential passengers. According to Section 2(44) and 2(45) of the CGST Act, 2017, an "electronic commerce operator" (ECO) is any person who owns, operates, or manages a digital or electronic facility for electronic commerce. The applicant qualifies as an ECO because it owns and operates the Rapido app, which facilitates the supply of services. Under Section 9(5) of the CGST Act, the government can specify categories of services for which the tax on intra-state supplies shall be paid by the ECO if such services are supplied through it. The applicant's platform meets this criterion, making it liable for tax as if it were the supplier.

2. Supply by Independent Four-wheeler Cab Service Providers and its Attribution to the Applicant:
The applicant argued that it merely provides a discovery platform and does not control the supply of services. However, the Authority found that the services of transportation of passengers are indeed supplied through the applicant's app. The app facilitates fare negotiation, shares passenger location with drivers, and notifies both parties about the start and end of the ride. Therefore, the supply by the independent four-wheeler cab service provider to his passengers on the Rapido app amounts to supply by the applicant under Section 9(5) of the CGST Act, 2017.

3. Applicant's Liability to Pay GST on Services Provided by Independent Four-wheeler Cab Service Providers:
Under Section 9(5) of the CGST Act, 2017, and Notification No. 17/2017-Central Tax (Rate), the tax on intra-state supplies of services by way of transportation of passengers by a motor cab shall be paid by the ECO. Since the applicant's platform facilitates the entire ride process, from booking to completion, the applicant is liable to pay GST on the supply of services provided by the independent four-wheeler cab service providers.

4. GST Rate and SAC Code Applicable to the Ride Monitoring Fee:
The applicant proposes a pay-per-use ride monitoring fee to ensure passenger safety. This service includes features like number masking, route deviation alerts, and SOS options. The service falls under SAC 9985 (specifically 998522 Security consulting services) and attracts 18% GST (9% CGST and 9% SGST) as per Sl. No. 23(iii) of Notification 11/2017-Central Tax (Rate) dated 28.06.2017.

5. Applicant's Liability to Pay GST on Services Provided by Independent Three/Two-wheeler Cab Service Providers:
Notification No. 17/2017-Central Tax (Rate) also covers services by way of transportation of passengers by a motor cab and motor cycle. The definitions of "motorcab" and "motorcycle" under the Motor Vehicles Act, 1988, include three-wheelers and two-wheelers. Therefore, the applicant is liable to pay GST on the services provided by independent three/two-wheeler cab service providers through its platform.

Ruling:
a. The applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualized in Section 9(5) of the CGST Act, 2017, read with Notification No. 17/2017 dated 28.06.2017.

b. The supply by the independent four-wheeler cab service provider to his passengers on the Rapido app amounts to supply by the applicant by virtue of Section 9(5) of the CGST Act, 2017.

c. The applicant is liable to pay GST on the supply of services provided by the independent four-wheeler cab service provider 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.

d. 18% GST (9% CGST and 9% SGST) is applicable on the ride monitoring fee, and SAC code 9985 is applicable for the said service.

e. The applicant is liable to pay GST on the supply of services provided by the independent three/two-wheeler cab service provider to his passengers on the applicant's app platform.

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