GST Rule on Ride-Hailing Subscriptions Could Backfire on Drivers and Riders, Study Warns

A fresh study from the Esya Centre has flagged a looming problem for India’s ride-hailing sector: applying GST liability under Section 9(5) of the CGST Act to subscription-based platforms could end up doing more harm than good, hitting both driver incomes and passenger wallets.

The report, titled Balancing Efficiency and Equity: Evidence From India’s Technology-Intermediated Transport Services Under The GST Regime, draws on responses from 1,044 drivers and 1,059 passengers spanning 13 cities across the country. It zeroes in on the subscription or SaaS-style model now used by several ride-hailing apps, where drivers pay a flat fee simply to get listed on the platform, but set their own fares, collect payments directly, and keep the full ride amount. This is a sharp departure from the commission-based aggregator model, where the platform controls pricing and payment flow.

According to the researchers, taxing this subscription model the same way under Section 9(5) creates a practical mess, since many independent drivers using these platforms don’t even meet the threshold for GST registration in the first place. Adding to the confusion, state-level Advance Ruling Authorities have issued conflicting decisions on near-identical business models, leaving operators without a consistent tax treatment to follow.

Drivers Fear Lower Income, Riders Fear Higher Fares

The survey data paints a fairly stark picture of what could happen if the tax were imposed. A large majority of drivers said their livelihoods would take a hit, with most expecting reduced take-home pay and fewer bookings. A significant share also said they’d likely shift toward informal, off-platform rides to avoid the added cost burden — the opposite of what the tax regime presumably intends.

Passengers aren’t insulated either. Esya Centre’s numbers show that even a modest 5% fare hike could push a large chunk of riders away from app-based cabs altogether, with many saying they’d fall back on traditional taxis instead. The report notes this shift would disproportionately affect women, lower-income commuters, and anyone relying on these apps for late-night or emergency travel — segments that also rated safety features on these platforms as a major reason for using them.

Industry Voices Call for Clarity

Esya Centre Director Meghna Bal said subscription-led models are gaining ground because they give drivers more predictable earnings while keeping rides affordable for passengers, and argued that tax policy needs to keep pace with this shift. EY Tax Partner Jayashree Parthasarthy echoed that sentiment, noting that indirect tax frameworks are being tested by these newer business structures and need to stay aligned with how the models actually function.

The report’s core recommendation is straightforward: GST under Section 9(5) should apply only where a platform actually controls fare-setting or payment collection — not simply because it offers safety or verification features mandated by transport regulators. Esya Centre argues that conflating regulatory compliance with “transactional control” is where the current ambiguity stems from, and fixing that distinction could prevent the sector from sliding into a more expensive, less safe, and more informal version of itself.