GST Caselaw

#GSTCase-28-E-Commerce Operator would be treated as supplier and liable to pay tax on services provided by taxi driver to customers using services of Electronic Platform provided by E-Commerce Operator

OPTA Cabs (P.) Ltd.-[2018] 100 taxmann.com 250 (AAAR-KARNATAKA)

 

  1. Query

 

Query 1: Whether service of Electronic platform provided by the appellant would be covered under E- Commerce Service under Section 9(5) of CGST Act, 2017?

 

Query 2: If such service is covered under E commerce category, than whether OPTA Cabs would be liable to pay GST on amount received by the taxi driver directly from the customers?

 

  1. Facts:

 

Appellant is engaged in business of providing electronic platform (mobile App and Website) to taxi drivers and to prospective customers whereby taxi drivers can access their prospective customers and customers can book their taxi. Passenger transport service is directly provided by taxi driver to customers and appellant is not engaged in providing any type of direct supply to the customers.

 

Amount is billed by appellant on behalf of taxi drivers for services provided by them to the customers. Customers can directly pay the charges to the taxi driver either in cash or through in E wallet of the driver. Appellant collects monthly usage charges from taxi drivers for providing electronic platform and does not charge any amount directly from customers. These charges are irrespective of the trips made or income earned by taxi drivers. Appellant does not charge any trip commission from taxi drivers. OTPA cabs deposits GST on monthly usage charges collected from drivers.

 

  1. Contention of the Appellant

 

There is no privy of contract on account of payment between appellant and customer. Customers pay directly to taxi drivers as the consideration paid by the customer for the service provided is received by the driver and is not received by the appellant. Section 9(5) uses the words “such services are supplied through it” and service is also not supplied through it but only booked through it.

 

  1. Observation of AAAR

 

Query 1: The appellant owns and operates IT platform for supply of service of transportation of passengers over the digital network. Using this digital network facility, appellant provides the taxi aggregation service wherein they connect both the customer as well as the taxi operator. The customer would book the taxi by using the IT platform provided by the Appellant and the taxi operator would be intimated about the potential customer through the same IT platform. Finally on completion of the service Appellant sends an invoice to the customer through the digital network facility which is payable by the consumer to the taxi driver. Hence M/s. OPTA Cabs Pvt Ltd is an “electronic commerce operator” in terms of the definition given in Section 2(45) of the CGST Act

 

Query 2: Under the provisions of sub-section (5) of section 9 of the CGST Act read with Notification No. 17/2017 – Central Tax (Rate) dated 28th June, 2017, services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle was notified as category of services, tax on intra-State supplies of which shall be paid by the electronic commerce operator. Section 9(5) of the CGST Act shifts liability to pay tax from actual supplier of notified services to e-commerce operator. Provisions of Section 9(5) of CGST Act do not in any way imply that supplier of service is e-commerce operator. Only liability to pay tax is now cast upon e-commerce operator. Supplier of service of transportation of passengers continues to be taxi operators. However, since the service is supplied by them through the e-commerce platform, the liability to pay the tax is cast upon the e-commerce operator by virtue of Notification No 17/2017 CT(R) dt 28.06.2017.

 

A booking for a taxi ride done on the Appellant’s digital application is the first step towards the supply of the service. In this case, booking for a taxi ride on the digital application is a part of the activity of the supply of the service of transportation of passengers. Without the booking no service can be supplied. Every supply begins with a request for the supply. Honouring such requests by the supplier of the goods or services, in return for a consideration, is the taxable event of ‘supply’. Therefore, booking for a service is also an integral part of the supply chain and hence there is no merit in the argument of the Appellant that the service has merely been ‘booked’ on their platform and not ‘supplied through it’.

 

The fact that E-Commerce operator is not receiving amount from customer is also not a valid consideration since e-commerce operator is deemed to have supplied the service in terms of Section 9 (5) read with the notification no. 14/2017.

 

  1. Held

 

Query 1: Services of Electronic platform provided by the appellant would be covered under E- Commerce Service under Section 9(5) of CGST Act, 2017.

 

Query 2: Electronic commerce operator shall be liable to pay tax on the services provided by a motor cab or maxi cab or motor cycle or radio-taxi, by way of transportation of passengers, if such services are supplied through it and it shall be deemed that the electronic commerce operator is the supplier in such cases.

 

  1. Comment

 

The appellant in the instant case had sought to challenge that services provided by taxi drivers were only booked on its platform and Section 9(5) of CGST Act, 2017 uses the “supplied through it”. Since no services have been supplied by the E-commerce Operator to the customer, therefore appellant is not liable to pay tax under the provisions of section 9(5) of CGST Act, 2017. AAAR held that booking for a service is also an integral part of the supply chain and hence there is no merit in the argument of the Appellant that the service has merely been ‘booked’ on their platform and not ‘supplied through it’.

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