Yatri Sathi Mobile App exempt from collecting GST on driver services under section 9(5) despite qualifying as E-commerce Operator

The AAR, West Bengal ruled that while the applicant operating Yatri Sathi Mobile App qualifies as an E-commerce Operator under section 2(45) of the GST Act, it is not liable to collect and pay GST on driver services under section 9(5). The Authority held that although the first two conditions of section 9(5) were satisfied - services being notified and intra-state supply - the crucial third condition was not met. The supply of services by drivers to customers was deemed independent in nature rather than being made "through" the e-commerce operator, thus exempting the applicant from GST liability under section 9(5).

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Issues Involved:

1. Whether the applicant falls under the purview of the E-commerce Operator as defined in section 2 (45) of the GST Act.
2. Whether the applicant shall be deemed to be the service provider under section 9 (5) of the GST Act for the Driver services provided through the "Yatri Sathi Mobile App."
3. Whether the applicant is liable to collect and pay GST on the services supplied by the Drivers to the Customers connected through the App.

Issue-wise Detailed Analysis:

1. E-commerce Operator Classification:

The applicant is a society registered under the West Bengal Societies Registration Act, 1961, engaged in developing a ride-hailing platform named "Yatri Sathi Mobile App." The primary question is whether the applicant qualifies as an E-commerce Operator under section 2 (45) of the GST Act. The definition of an E-commerce Operator includes any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce. The applicant owns and manages the "Yatri Sathi" platform, which connects drivers and customers for transportation services. Despite the applicant's argument that it only facilitates connections and does not engage in the supply of services, the authority concluded that the applicant fits the definition of an E-commerce Operator as it owns and operates the digital platform for electronic commerce.

2. Service Provider under Section 9 (5):

Section 9 (5) of the GST Act mandates that the tax on specified services supplied through an electronic commerce operator shall be paid by the operator as if they are the supplier. The applicant argued that it merely connects drivers and passengers without controlling the actual service provision, thus not qualifying as a service provider under this section. The authority examined the nature of the applicant's role and found that the applicant does not have significant involvement in the processes of booking, payment handling, or ensuring service delivery, which are essential to be considered as supplying services "through" the platform. Consequently, the authority ruled that the supply by the service provider (driver) to his customers (passengers) through the Yatri Sathi App does not amount to supply by the applicant, and thus, the applicant is not deemed to be the service provider under section 9 (5).

3. GST Liability on Services Supplied:

The final issue is whether the applicant is liable to collect and pay GST on services supplied by the drivers to the customers through the App. The authority evaluated the business model, noting that the applicant does not determine fares, collect payments, or exert control over the service quality. The applicant operates on a subscription-based model without charging commission fees, and the drivers are responsible for collecting fares directly from customers. Since the applicant does not satisfy the conditions of Section 9 (5) for discharging tax liability as an electronic commerce operator, it is not liable for GST on the services supplied by the drivers. Therefore, the applicant is not responsible for collecting and paying GST under section 9 (5) of the GST Act.

Conclusion:

The authority ruled that while the applicant qualifies as an E-commerce Operator, it is not deemed to be the service provider under section 9 (5) for the driver services facilitated through its platform. Consequently, the applicant is not liable to collect and pay GST on the services supplied by the drivers to the customers through the App.

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