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TMI Blog2024 (7) TMI 1505X X X X Extracts X X X X X X X X Extracts X X X X ..... r not and whether they are liable to discharge tax liability in terms of Section 9 (5) of the CGST Act 2017? - HELD THAT:- Electronic Commerce Operator (ECO) means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce i.e. for the supply of goods or services or both, including digital products over digital or electronic network. In the instant case the applicant owns digital platform ( Rapido APP). for the supply of services. Thus the applicant squarely fits into the definition and qualifies to be an Electronic Commerce Operator. Charging section i.e. Section 9 (5) of the CGST Act 2017 - HELD THAT:- In the instant case the services of transportation of passengers are provided by a four-wheel car. which is a motor vehicle adapted to carry maximum four passengers excluding driver and thereby it can carry not more than six passengers excluding the driver and hence qualifies to be a motorcab . Titus the first two conditions viz., (a) and (b) are satisfied in the instant case, in as much as the category of services of Intra-state supplies are notified by the Government covering services by way of transportation of passengers by motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Services Pvt. Ltd. (herein after referred to as Applicant ), #80/1,81/1,81/2, Salarpuria Softzone, Green Glen Layout, Bellandur Village, Varthur Hobli, Bengaluru 560 103, Karnataka, having GSTIN 29AAHCR1710J1ZC. have filed an application for Advance Ruling under Section 97 of CGST Act. 2017 read with Rule 104 of CGST Rules. 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 of discharging the fee of Rs. 5.000/- each under the CGST Act and KGST Act. 2. The applicant stated that they are a registered private limited company, also registered under the GST Act and are engaged in the business of providing technology based services to their end users for booking two-wheelers and three-wheeler passenger transport services offered by third party drivers by means of the company website and its mobile app platform Rapido . The applicant proposes to introduce computer/mobile application services to independent four-wheeler cab service providers on subscription basis, as a discovery platform to enable them to connect with potential end-users (also referred to as passengers, who require the services of such third party drivers on its platform. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relevant to the issue/s: 5.1 The applicant stated that they are engaged in the business of providing technology based services to their end users for booking two-wheelers and three-wheeler passenger transport services offered by third party drivers |also referred to as Captains ) by means of the company website and its mobile app platform Rapido . They proposed to introduce computer/mobile application services to independent four-wheeler cab service providers on a subscription basis, as a discovery platform, to enable them to connect with potential end-users ( passengers ) who require the services of such third party drivers ( subscribers ) on their platform. The drivers shall register with the app, enter into a standard agreement and have a business user account that provides license or permission to use the said app. 5.2 The Applicant submitted that in their proposed model, the independent four wheeler cab service provider shall become a subscriber to the app and the relationship between the members and the passenger would be of supplier and recipient and any monetary consideration involved between them is purely privy to their contract and the applicant in no way connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or at the best negligible and only to the extent of providing the app usage to provide leads to the driver. Intent of the App Lead Generation for Driver and discovery of drivers for Customers. The app is not in the space of providing any mobility or commuting to the passengers or do not act on behalf of the driver or to the passenger in the transaction at all. Any passenger who looks for a ride will use the app to look for drivers to provide them services. The company does not provide drivers to the passengers or act on behalf of the driver to get into any transaction with the passenger. The app acts as a discovery platform to enable its app for passengers to look for drivers and drivers to offer their services to passengers without getting into acting as an intermediary for, or and on behalf of either of the sides to the transaction. There is no Settlement to driver by the company at all. There is no collection of money from any passenger on behalf of the driver. Therefore, there is no concept of settlement to the driver at all. The driver pays the subscription charges on which the GST is paid. The consideration payable by the user to the driver is paid directly and not through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is limited to payment of tax at the rate of 18%, under Section 9 (1) of the CGST/KGST Act 2017 and Section 5 (1) of the IGST Act 2017 read with Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, on the consideration received / receivable of subscription fee. Further the applicant is not liable to pay tax under Section 9 (5) of the CGST/KGST Act 2017 and Section 5 (5) of the IGST Act 2017 read with Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017 Notification No 17/2017-Central Tax (Rate) updated till 14th Nov 2017 6.2 The principal charging provisions are section 9 (1) of the CGST/KGST Act 2017 Section 5 (1) of the IGST Act 2017 and in terms of said sections the liability to pay tax on outward taxable supplies of goods or services or both, as the case may be, is on the supplier . Section 2 (105) defines the expression supplier , in relation to any goods or services or both which shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied. 6.3 The taxable supplies effected by the subscribers of the app platform of the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another. From this perspective also it is submitted that there is no specific supply of services in the form of commuting services that are provided on behalf of the drivers or the end users. The app is intended to be a lead generation discovery platform per se. 6.7 Section 9 (5) of the CGST Act 2017 r/w notification No. 17/2017 dated 28.06.2017, notification No. 23/2017 dated 22.08.2017 and notification No 17/2021 dated 18.11.2021 does not contemplate or envisaged noninterfering and commission free business adopted by the applicant. It is applicable to business model which collects payment on behalf of the supplier. As the applicant does not propose to collect any payment on behalf of the supplier the question of collecting tax on behalf of the supplier cannot arise. Hence, the applicant would not be liable for the GST on the transaction earned on by the cab provider with his passenger. Moreover, the supplier raises invoice to his passenger the passenger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rier, stage, or test. e) Until, and including. The word through is a preposition which means a word or group of words, such as in, from, to, out of and on behalf of, used before a noun or pronoun to show place, position, time or method. The word through in Section 9 (5) is used to indicate the method under which the supply of services was initiated, carried on and concluded. The dictionary meaning clearly specifies that the word through implies that the supply should be initiated, carried on and concluded by the specified method. 6.11 In the instant case the supply is not carried on and concluded by using the applicant s app. The applicant invites attention to the below mentioned submissions:- a) The applicant provides technology to cab operators (through the APP) This allows the passenger to identify the nearby cab through which he can take the ride and no further. b) The ride is not monitored by the applicant unless it is paid for by the recipient as per the proposed pay-per use model discussed supra, which is a separate service altogether that is provided on their own account to the passenger. It is pertinent to point out that the monitoring of ride is not automatic and will hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the applicant pleads helplessness to collect and pay tax on behalf of the supplier. Therefore, the applicant cannot be concluded as a supplier for services rendered by cab operator. The applicant submits that the facts of this case are similar to Multi-Verse Technologies Pvt. Ltd (GST AAR Karnataka-Advance Ruling No. KAR ADRG 36/2022 dated 27.10.2022) (please refer Annexure-II) with respect to the proposed subscription based offering to the cab drivers, wherein the Karnataka AAR held that the supply by the service provider (person who has subscribed to Applicant s app) to his customers (who also have subscribed to Applicant s app) on the Applicant s computer application does not amounts to supply by the Applicant The AAR in that ruling also held that the Applicant is not liable to collect and pay GST on the supply of goods or services supplied by the service provider (person who has subscribed to Applicant s app) to his customers (who also have subscribed to Applicant s app) on the Applicant s computer application. Further the AAR observed that with reference to Merriam Webster s Dictionary, the word through is used as a function word to indicate means, agency, intermediary such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Driver There would be a subscription charges from the driver for usage of app per se. The Subscription charges is towards usage of the platform or the app in order to provide leads to the driver about passengers who is looking for a ride. Revenue from platform usage Other than subscription fee, there would no charges on the drivers. The Subscription charges towards usage of the app is the only charges that would be collected from the driver Collection of money on behalf of from passenger The settlement of consideration is between the driver and the user, and the company has no role to play. The company does not act on behalf of the driver in collecting any fare from the passenger at all. Intent of the App Lead Generation for Driver and discovery of drivers for Customers. There is no Settlement to driver by the company at all. There is no collection of money from any passenger on behalf of the driver Treatment of supply through e-com The supply is not through the company or the app at all. The App is meant as a pure discovery platform to enable driver to provide services to the users and the company doesn t facilitate the mobility. Who arrives at the fare details? The fare is driv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are being enabled to ensure calls made by driver partners are being answered by customers. Face recognition Measures are being undertaken to establish face recognition wherein the driver partner would be required to upload their selfie before the ride starts. During the ride Route deviation In case any route deviation is being noticed, a notification pops up on the customer s mobile app thereby highlighting such deviation. Long stop In case a vehicle is stationed at a particular point for longer duration than expected, notification shall be sent to the customer to check if the ride is safe. Sharing ride details Customers have the option to share the ride with anyone to make the ride safe. Upon sharing the ride, SMS or whatsapp message would be sent to the person with whom the ride has been shared by customer. SOS It is proposed to have as part of the app, an SOS (Emergency call) button on the app that can be used by customers for reaching out to the team during any emergency throughout the ride. The option is visible to customers after the confirmation of a ride mid having opted for the pay per use safety option and this facility is available till the end of the ride app has an S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation about the fare which is ultimately paid by the passenger to the Captain after the ride concludes. Accordingly, at the beginning of a ride, the Applicant is not involved in determination of the ride fare; and after the ride concludes, while the Applicant has visibility of the fare initially agreed/ decided between the Captain and passenger, it is not aware of the actual fare paid/ settled by the passenger to the Captain. 9.2 In respect of the pay-per-use ride feature, the Applicant s intent is to ensure the passenger s safety during the ride once the passenger avails the ride. However, the Applicant wishes to submit that the said feature has not been implemented till now. Accordingly, screenshots in relation to the same are not available with the Applicant. Further, basis market conditions and the Applicant s assessment, in case the Applicant implements the said feature in the future, it shall be offered to the passengers using the same infrastructure. 9.3 The Applicant herein submits that the details pertaining to the ride, i.e. start location, destination, fare initially shown and fare shown on completion of the ride is maintained by the Applicant to enable their submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Whether App provides the Driver to notify the End of Ride As the Applicant provides a discovery platform to the Captains to enable them to select the desired passenger to whom they wish to offer ride services, it is integral and essential for the Applicant to be aware about availability of a particular Captain, so that the leads generated nn the platform are made available to such Captain, for subsequent rides. Accordingly, the Captain s application interface includes a specific feature designed to allow Captains to notify the Applicant at the conclusion of each ride. This function is integral to ensure seamless operation of the Applicant s discovery platform service. 9.9 During the ride whether the App displays the route to the passenger While the Applicant is a mere lead generating platform, the Applicant displays the route to the passenger bearing in mind their safety and security as a discovery platform, as it is essential for us to ensure leads generated by our platform are safe for the passenger availing the ride. 9.10 : Whether on completion of ride the final price is displayed in the App. Applicant s Submission The application only displays limited information on completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has no rights or say or control over the supply; the relationship between the drivers and the passengers would be of supplier and recipient and any monetary consideration between them is purely privy to their contract and the applicant is no way connected with such contract; in case of any dispute between the driver and passenger, it would be purely between them and the applicant would not be responsible; there is no involvement of the applicant in the supply of services by the drivers as well as arranging for collection of any consideration or any other form of agreed means of payment from the passengers. 14. The applicant also submitted some additional facts stating that they do not propose to collect any money from passenger or consideration towards the ride; they collect only subscription charges from the drivers for usage of the platform on raising invoice and discharge GST on the entire subscription charges; they do not act on behalf of the driver in collecting any fare from the passenger and thus they do not act as e-commerce operator; they neither provide drivers to the passenger nor act on behalf of the driver to get into any transaction with the passenger; there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and collection. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services the lax on intra-State supplies oj which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative to the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. It could be inferred from the definitions supra that Electronic Commerce Operator (ECO) means any person who owns, operates or manages digital or electronic facility or platform for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services are supplied through the electronic commerce operator or not. The word through in Section 9 (5) is not defined in the relevant context and hence we proceed to discuss the meaning of the said word/phrase. 19. In this regard, we invite reference to Merriam Webster dictionary, in accordance to which the word Through is used as a function word to indicate means, agency, intermediary such as by means of , by the agency of etc . The word Through is also used as a function word to indicate extent, period of time such as during entire period, from the beginning to the end, to and including etc. Thus the word through in the phrase services supplied through electronic commerce operator, in Section 9 (5) ibid, gives the meaning that the services are to be supplied by means of / by the agency of / from beginning to the end /during entire period by e-commerce operator. 20. In the instant case, as admitted by the applicant in his application and from the reply did 24.4.24 to clarification, the following facts are brought out:- (i) the applicant s App sends the information, pertaining to a specific ride that a passenger wishes to book to all the drivers within certain radius of the locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver and the passenger and the service is supplied by the driver to passenger, liability to pay tax is fastened on the electronic commerce operator by way of deeming provision in Section 9 (5) i.e, ..all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax m relation to the supply of such services . Here the supply of such service refers to the supply of services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle; as notified vide Notification 17/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9 (5) of CGST Act, 2017, and supplied through the electronic commerce operator. 22. In view of the foregoing we find that the applicant is squarely covered in the definition of electronic commerce operator and the supply of services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle is supplied through them. Further, by virtue of Section 9 (5) the applicant is liable to pay tax on the supply of the services of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle. 23. The applicant also proposes to introd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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