GST move puts subscription model under pressure
October 12, 2026
Tax on entire fare could force platforms to revisit pricing, with drivers and riders facing the fallout
The GST Council’s proposal to clarify tax liability on app-based rides could make the subscription model used by ride-hailing platforms significantly more expensive. There’s a likelihood that companies may reconsider a business model that has gained ground across the industry over the past few years.
Under the model, drivers pay platforms a fixed subscription or recharge fee and retain the entire fare from each ride. Platforms have so far paid 18% GST on the subscription fee as they provide technology services rather than the underlying transport service. The proposed clarification to Section 9(5) of the Central GST Act would require platforms to pay 5% GST on the entire fare for notified services, irrespective of their commercial model.
The change could create a significant mismatch between the tax liability and the revenue earned by platforms. On rides worth Rs 10,000 in a day, a platform collecting a subscription fee of Rs 100 would have to pay about Rs 500 in GST on the fares, five times its revenue from the driver, Ajay Sanwaria, partner at AQUILAW, said. The tax would have to be paid in cash and cannot be set off against input tax credits, adding to the working-capital burden, Aditya Bhattacharya, partner at King Stubb and Kasiva, added.
The subscription model, pioneered by Namma Yatri, has spread across much of the industry. Rapido adopted it in 2023, while Uber and Ola shifted their auto-rickshaw drivers to subscriptions in 2024-25 and extended the model to cabs in 2025. The government-backed Bharat Taxi also follows the model. Auto-rickshaw subscriptions typically cost Rs 10-50 a day, while cab subscriptions range from Rs 100 to Rs 2,000, according to industry sources. Bike taxis, however, continue to operate largely on commissions.
The additional tax could force platforms to choose between absorbing the cost, raising fares or reducing driver earnings. Industry executives said drivers could face the initial pressure, as sudden fare increases risk making rides less affordable and driving customers away. Bhattacharya, however, expects platforms to protect driver earnings to retain supply. “Driver supply is hard to win and easy to lose, so I suspect most platforms will try to protect driver earnings first,” he said.
Platforms have begun assessing their options, including whether to return to commission-based pricing for some services. “The larger question is whether platforms will have to move back to commissions, and whether driver-partners now used to subscription and recharge models will be willing to come back. We are trying to figure this out as we speak,” a senior executive at a ride-hailing firm said.
The proposal runs counter to the industry’s demand for subscription-based services to be excluded from Section 9(5). The Internet and Mobile Association of India, representing Uber, Ola and Rapido, had urged the revenue secretary in a January 19 letter to exempt such models, citing conflicting rulings by state advance ruling authorities. Rapido had said that taxing both subscriptions and fares would amount to taxing the same service twice and could affect affordability and driver earnings.
Uber has welcomed the prospect of greater clarity, saying differing interpretations had created uncertainty and the potential for an uneven competitive environment. Rapido, Namma Yatri and Ola did not respond to FE’s requests for comment. The proposed change would require amendments to the Central GST Act and corresponding state GST laws. Industry executives said any retrospective application would raise further concerns.
[The Financial Express]
