News Update

Delhi High Court Upholds Government’s GST Notification on Online Auto Rickshaw Rides

• ByStartupStory     |    April 13, 2023

The Delhi High Court has upheld the imposition of Goods and Services Tax (GST) on auto rickshaw rides booked through cab aggregator platforms, dealing a blow to ride-hailing giants Uber and Ola who challenged the levy of GST on their services. In a recent hearing, a division bench of Justices Manmohan and Manmeet Pritam Singh Arora ruled that the decision to levy GST did not violate fundamental rights, and that the classification of app-based cab aggregators as a separate class of service providers was rational and aligned with the provisions of the GST Act.

The court has dismissed Uber’s petition challenging the imposition of GST on auto rickshaw rides, stating that the notifications in question did not result in discrimination as the classification of e-commerce operators was recognized by the statute. Uber India had challenged the November 2021 notifications, arguing that the increase in prices of auto rickshaw rides on the app would have a significant impact on the market. Uber further contended that the notification was discriminatory as the government had no plans to impose GST on auto rickshaw rides booked through offline methods, and prices of local auto rides remained low. According to Uber, the government’s directives did not meet the test of reasonable classification, as there should be no differentiation in tax treatment between app-based and offline passenger transport services provided by auto drivers.

Auto rickshaw aggregators like Uber, Ola, and Rapido are facing growing government scrutiny, with many state governments also taking steps to bring them in line with traditional offline auto rickshaws in terms of taxes. For example, the Karnataka government issued a directive in November 2022 for regional transport authorities to impose convenience fees and GST on auto rides booked through ride-hailing apps. Additionally, several states have raised concerns about the disparity between the fares charged by app aggregators and the fares notified by the government.

In March, offline auto rickshaw drivers in Bengaluru staged a 24-hour strike, demanding a complete ban on bike taxi operations in the city, due to increasing pressure from app aggregators. The strike was organized by the Auto and Taxi Drivers Union and backed by 20 auto unions, resulting in the city coming to a halt. One of the issues contributing to the conflict is the lack of guidelines for auto-rickshaws in the vehicle aggregator norms issued by the Centre in 2020. Moreover, states that have formulated their own local norms have not included bikes or auto-rickshaws in their aggregator regulations, leading to friction between authorities and app-based vehicle aggregators.

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