9911796707
TMI Blog2024 (11) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... tor cycle. - SRI. KIRAN REDDY T AND SRI. PRATHAP KUMAR S, MEMBER Represented by : Sri. Onkar Sharma, Advocate Authorised Representative ORDER UNDER SECTION 98 (4) OF THE CGST ACT, 2017 UNDER SECTION 98 (4) OF THE KGST ACT, 2017 M/s. Uber India Systems Private Limited (herein after referred to as Applicant ), 2nd Floor, 77, Survey No. 124/2, Prabhas Legacy, Murugeshpalya, H.A.L. Post, N.A.L. Wind tunnel Road, Bengaluru 560 017, having GSTIN 29AABCU6223H2Z9, 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 discharging the fee of Rs. 5,000/- each under the CGST Act, KGST Act. 2. The applicant submitted that they propose to enter into a new business model where they would be engaged in providing technology services by providing an online platform to drivers for merely connection with the riders. 3. In view of the above, the applicant has sought advance ruling in respect of the following questions: a. Whether the Applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualized in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em for both parties; the drivers, after making payment of membership fee, if any, become the customer for the new business model and can receive requests from persons who wish to avail passenger transportation services by road from them; riders can provide the start and end location for which they intend to avail passenger transportation services by road, basis which nearby service providers can be identified and selected by the riders themselves; initially the proposed business model shall include auto rickshaws (three wheeled vehicles), the applicant may include drivers for motorcycles (two wheelers) and cars (four wheelers) under this model in the future as well. 5.4 The Applicant further submitted that once the ride is requested by the riders, it is forwarded to the relevant drivers; the drivers may either accept the ride or reject or offer a counter price to the rider for the requested trip; the actual supply of passenger transportation services by road is performed by the driver for the rider; the proposed business model would a service provider s hub wherein the supplier has absolute ownership of their supply; the terms and conditions governing such supply and other aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd riders/passengers takes place directly between the driver and riders, and there is no involvement of the applicant in either arranging for supply of services from the persons registered for the new business model or arranging for collection of any consideration or any other form of agreed means of payment from the buyers to the drivers; the online platform is only involved for the limited purpose of identification / connection of drivers and riders. 6. Applicant s Interpretation of Law: The applicant furnishes their interpretation of law and / or facts, in respect of the questions on which advance ruling has been sought, inter alia stating as under: 6.1 The Applicant, from the nature of transactions involved, is of the opinion that output GST at 18% is payable by the Applicant only on the membership fee collected (if any) from the subscribers who are availing the services of the Applicant s online technology platform to provide services on their own 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. 6.2 The Applicant, in no way, is liable for tax on the transactions that ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired by Applicable Law is obtained and always maintained, and the Customer and/or Uber shall not be liable for taking insurance or paying premium thereof in respect of the Vehicle or any liability arising out of plying of such Vehicle. 8. The Driver shall ensure and confirm that he understands the language of the Driver App and shall ensure that he/she chooses the best language known to him amongst the options displayed on the Driver App. 9. The Driver will have a functioning mobile number and also have the ability to read text messages sent by Uber, regarding the Customer details and to convey Customer feedback. 10. The Vehicle shall be the sole responsibility of the Drivers and the Driver shall be liable or responsible for any loss or damage to the Vehicle caused by a Customer or any other third party for any reason whatsoever. 11. The Driver shall not drive rashly, shall follow traffic regulations and all Applicable Laws during the performance of the Driver Services, not consume liquor/ cigarette / bidi, or any other kind of intoxicant while performing the Driver Service/(s) and shall always have and hold a valid driving license and registration/insurance papers for the Vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed taxes related to the performance of Driver Services hereunder, including but not limited to withholding or other taxes related to central or state income tax, social security benefits or unemployment compensation. Copy of the Driver s Terms were also enclosed with the application. 6.5 The Applicant, quoting Section 9 (5) of the CGTST Act 2017, stated that they believe that the Company is not liable to discharge any GST under Section 9 (5) of CGST Act 2017 as the said Section 9 (5) of CGST Act, read with Notification No. 17/2017 Central tax dated 28 June 2017, Notification No. 23/2017-Central Tax dated 22 August 2017 and Notification No 17/2021 Central Tax dated 18 November 2021 provides for certain specified category of services, which when provided through the ECO, would be taxable in the hands of ECO. 6.6 The conditions required to be satisfied in order to attract levy under Section 9 (5) of CGST Act are as below:- a) There exists an Electronic Commerce operator. b) The services by the supplier are covered in the notified services. c) The services by the supplier to the consumer are supplied through the electronic commerce operator. The above conditions once satisfied will res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicle except omnibus (where person supplying such service is a Company) are notified to be one of such services on which GST shall be paid by ECO in terms of Section 9 (5) of CGST Act read with Section 5(5) of the IGST Act. Accordingly, the second condition in the proposed model also stands satisfied. 6.11 With respect to the third condition i.e., whether notified services are supplied through ECO or not for the proposed business model, the Applicant believes that the services of passenger transportation are not provided through the platform of the Applicant, but the said platform is only a means of connecting the supplier and the recipient. Detailed discussion in this regard is hereby provided in the ensuing paragraphs. 6.12 It is to be noted that the term through is not defined under the GST provisions. As per the dictionary meaning, the word through has been defined to indicate means/ agent/intermediary and also as a function to denote from beginning to the end . As per the law lexicon dictionary also, it has been explained that the word through always means from end to end or from side to side, but frequently means simply within. Further, taking reference from Merriam Webste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumer for deficiency on the part of the supplier in rendering of the services. g) The Applicant does not issue any invoice to the passenger/ rider for the services provided by the Subscriber/ driver. h) The supply happens independent of the Applicant and the Applicant is involved only in the identification of the supplier of services and doesn t take responsibility for the operational and completion of the ride. In view of these facts, the Applicant believes that it does not fall under the aspect of providing services through their platform as notified under Section 9 (5) of the CGST Act. Accordingly, the third condition for the applicability of levy under Section 9 (5) of CGST Act cannot be said to be fulfilled. 6.15 Moreover, Section 9 (5) of CGST Act, does not contemplate or envisage a non-interfering and commission free business adopted by the Applicant in the Proposed Business model. It is applicable to a business model which collects payment on behalf of the supplier. As the Applicant has not collected any payment on behalf of the supplier, the question of collecting tax on behalf of the supplier does not arise . Hence, the Applicant would not be liable for the GST on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions in Driver s Terms and Conditions and the facts narrated and explained as above, it is our bona fide belief and understanding that the Applicant s liability to pay GST is limited to payment of tax at the rate of 18% under Section 9 (1) of CGST and KGST Acts and Section 5 (1) of the IGST Act, read with Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 issued under the CGST Act and similar/identical notification issued under Section 9 (1) of the Karnataka SGST Act and Notification No. 8/2017-Integrated Tax (Rate) dated 28.6.2017, on the consideration received/ receivable of registration fee/ periodical subscription that the Applicant collects from the subscribers of their proposed business model and nothing more. 6.18 It is also the understanding and bona fide belief of the Applicant that, the Applicant is not liable to pay tax under Section 9 (5) of the CGST and SGST Acts and Section 5(5) of the IGST Act, read with Notifications Nos. 17/2017-Central Tax (Rate) dated 28.6.2017 issued under the CGST Act and similar/identical notification issued under Section 9 (5) of the Karnataka SGST Act and 14/2017-Integrated Tax (Rate) dated 28.6.2017, respectively. 6.19 As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assenger transportation services would be of the driver. b) The driver will be on boarded, after submission of necessary / relevant documents and accepting the Driver Terms and Conditions. The subscription fee/ membership fee will be charged periodically (daily/ monthly/quarterly) from the driver for provision of technology platform services which connects them with consumers desirous of availing passenger transportation services. c) Under the Proposed Model, the riders can provide the start and end location for which they intend to avail passenger transportation services. The nearby drivers are then informed about such request through the technology platform. d) A driver may accept the request, post which the rider is informed of the details of the driver. The platform provides a suggested/ estimated fare basis the distance between start and end location as provided by the rider, however, actual fare shall be directly determined and settled independently between rider and driver. e) The Applicant has no involvement in the final determination and collection of trip fare. The payment for trip fare is directly made by the rider to the driver. f) The actual supply of passenger transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept either of the trips or reject both the trips. In this example, the driver had selected the 1st trip shown above. The Uber app merely provides an estimated fare. However, the Applicant does not have any control and/ or rights over the final determination of actual fare and the actual fare paid by the rider to the driver. The Uber app has no record of the amount paid by the rider to the driver. Query 2: Whether the details/ data pertains to the ride i.e., start location, destination, fare initially shown, final fare shown on completion of the ride are recorded in the server/ app or not. If so, the relevant screenshots capturing the data may be furnished. Response : As mentioned in the advance ruling application, certain details pertaining to the ride are available on the Uber app such as driver information, vehicle information, suggested fare, trip destination requested by the rider, and the pick-up location chosen by the rider. This information is necessary to help riders and drivers to connect. It may be noted that the Applicant does not have any control and/ or rights either over the supply of passenger transportation services by drivers and on final determination of actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... App is in the development/ planning stage, then it may be stated as to how the above instances are proposed to be addressed. Response : It is submitted that the Uber app, in relation to the new business model, is being tested in a few cities outside Karnataka and has not been launched in Karnataka. Therefore, we have provided screenshots of the Uber app from these cities where the new business model has been launched. The applicant requested to take the above submissions on record and oblige and also requested to grant an opportunity to be heard in person. 8.1 The applicant, filed Writ Petition No.25497/2024, before the Hon ble High Court of Karnataka, for expeditious issuance of the advance ruling and the Hon ble High Court issued interim directions dated 25.09.2024 to dispose of the advance ruling application of the applicant, within a period of six weeks. Accordingly, an opportunity of personal hearing was granted on 21.10.2024 and Sri. Onkar Sharma, Advocate and authorized representative of the applicant appeared and reiterated the facts narrated in the application. FINDINGS DISCUSSION 9. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, it is forwarded to the relevant drivers; the drivers may either accept the ride or reject or offer a counter price to the rider for the requested trip; the actual supply of passenger transportation services by road is performed by the driver for the rider; the proposed business model would be a service provider s hub wherein the supplier has absolute ownership of their supply; the terms and conditions governing such supply and other aspects such as quality, price etc., are mutually agreed upon by the drivers and riders; the applicant has no rights over the supply of passenger transportation services by drivers to their customers/riders; the proposed model would be commission-free monitisation model i.e. no commission would be charged by the applicant either from the drivers or from the riders on a per ride basis, however the applicant may charge a periodical subscription membership fee from the subscribers/drivers; the applicant does not issue an invoice to the rider for the trip; any disputes between drivers and the riders are to be settled between them and the applicant is in no way involved in the dispute resolution process. 14. The applicant further claimed that the supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifies to be an E-Commerce Operator is proper or not. We invite reference to Section 2 (44) and 2 (45) of the CGST Act 2017, which are as under: 2 (44) -electronic commerce means the supply of goods or services or both, including digital products over digital or electronic network; 2 (45)-electronic commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce; 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 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 for the supply of services. Thus, the applicant squarely fits into the definition and qualifies to be an Electronic Commerce Operator. 17. The applicant contends that they are a technology providers; the drivers provide mobility/ride services to the passengers/riders; they neither know about the final fare nor they collect any amount towards consideration of the ride and thus the ride is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wheeler vehicles) and cars (four wheelers) which are motor vehicles adapted to carry maximum four passengers excluding driver and thereby they can carry not more than six passengers excluding the driver and hence they qualify individually to be a motorcab . Further the two-wheeler is covered under motor cycle . Thus the second condition is also 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 cab / motor cycle. 18.3 Now we proceed to examine the crucial and most important issue i.e. whether the impugned 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. 18.4 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, intermediacy 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 , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) Beginning and end of the ride are notified to the passenger through the App (ix) The App also notifies the arrival of Driver at the pickup location. (x) The driver collects the payment from passenger directly. It is apparent, from the aforesaid facts, that the App (digital platform) does not merely connect the rider with the driver but provides a platform for communication between the driver and rider without which the contract for providing the passenger transportation service cannot be completed. The App provides for onboarding the drivers, provides for user interface for drivers and riders, enables selection of start and end point by the rider, calculates and displays a fare Once ride is confirmed, the location of customer pick up point is shared by the App; start of ride, route taken for ride, end of ride are captured and notified to customer by the App. Thus effectively the services of transportation of passenger by the driver is supplied through the Applicant s App/digital platform/portal from beginning to end and also during the entire period of the ride. Thus the third condition that the services are supplied through electronic commerce operator is also satisfied. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
