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Economics May 12, 2026 4 min read Daily brief · #41 of 41

GST Council to explore simplifying procedures, clarify taxation of ride-hailing apps

The GST Council is likely to meet before mid-July 2026 to consider proposals to simplify GST procedures and clarify the taxation of ride-hailing app companie...

GS Paper 2 (Government Policies) GS Paper 3 (Indian Economy)

What Happened

  • The GST Council is likely to meet before mid-July 2026 to consider proposals to simplify GST procedures and clarify the taxation of ride-hailing app companies such as Ola, Uber, and Rapido.
  • The central government is examining amendments to Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017, to bring consistency in tax treatment across the two distinct business models operated by ride-hailing platforms.
  • The issue arises from ambiguity over whether ride-hailing platforms function as transport aggregators (commission-based) or software-as-a-service (SaaS) providers — each attracting significantly different GST treatment.
  • Proposals before the Council also include making GST registration and claiming of input tax credits simpler for businesses.

Static Topic Bridges

GST Council: Structure and Decision-Making

The GST Council is a constitutional body established under Article 279A of the Constitution (inserted by the 101st Constitutional Amendment Act, 2016). It is the apex federal body for making recommendations on all matters related to goods and services tax. The Union Finance Minister chairs the Council, with Finance Ministers of all states and Union Territories as members.

  • Decisions in the GST Council are made by a three-fourths majority of votes cast, with the Centre holding one-third of the total votes and states together holding two-thirds.
  • The Council's recommendations are not legally binding — Parliament and state legislatures must separately enact them — but in practice have been implemented uniformly.
  • The Council has held over 50 meetings since its first sitting in September 2016 and has progressively rationalised the rate structure and resolved interpretive disputes.

Connection to this news: The proposed clarification on ride-hailing taxation will be taken up as a GST Council recommendation, illustrating the Council's role as a federal deliberative body that resolves emerging sectoral tax ambiguities through consensus.

Section 9(5) of the CGST Act, 2017: E-Commerce Operator Tax Liability

Section 9(5) of the Central Goods and Services Tax Act, 2017 is a special provision that shifts the GST liability from an individual service provider to the electronic commerce operator (ECO) through whose platform the service is supplied. Under this provision, the government can notify specific services where the ECO — rather than the actual service provider — is deemed the supplier for tax purposes and is required to collect, pay, and file GST.

  • Notified services under Section 9(5) include passenger transport via motor vehicles (i.e., ride-hailing), accommodation services (e.g., hotel aggregators), and housekeeping services through digital platforms.
  • For ride-hailing: under the commission model, the aggregator pays GST at 5% (without ITC) or 12% (with ITC) on the passenger fare — the platform is the deemed supplier.
  • Under the SaaS model adopted by some platforms, drivers pay 18% GST only on the subscription/software fee; no GST is levied on the passenger fare, since the platform claims it is not the transport supplier.
  • This divergence creates tax arbitrage and compliance inconsistency, which the proposed CGST amendment aims to resolve.

Connection to this news: The government's proposed amendment to Section 9(5) directly targets this ambiguity — aiming to define a uniform tax treatment regardless of how a platform characterises its business model.

GST Rate Structure and Cascading Effect Elimination

The Goods and Services Tax, implemented on July 1, 2017, replaced a complex web of indirect taxes including Central Excise Duty, Service Tax, VAT, Entry Tax, and Octroi, eliminating the cascading "tax on tax" effect. The GST structure has four primary slabs: 5%, 12%, 18%, and 28%, with a cess on luxury and demerit goods.

  • Services are generally taxed at 18% unless specifically notified at a lower rate.
  • Passenger transport by radio taxi/app-based cabs is specifically notified at 5% GST (without ITC) under the commission model via Section 9(5), which is a concessional rate relative to the standard 18% service rate.
  • Input Tax Credit (ITC) allows businesses to set off GST paid on inputs against GST payable on outputs — a foundational feature that prevents cascading.
  • Simplification proposals being examined include easing the conditions for ITC eligibility and streamlining the registration process for new businesses.

Connection to this news: The ride-hailing tax ambiguity is a microcosm of the broader GST design challenge — balancing uniform tax treatment across similar economic activities while accommodating genuinely different business models.

Key Facts & Data

  • GST Council constituted under: Article 279A, Constitution of India (via 101st Constitutional Amendment Act, 2016)
  • GST implemented: July 1, 2017
  • Relevant provision: Section 9(5) of the CGST Act, 2017
  • GST on ride-hailing (commission model): 5% without ITC or 12% with ITC on passenger fare
  • GST on SaaS model subscription: 18% on driver's software fee only
  • GST Council decision majority: three-fourths of votes cast (Centre: 1/3; States: 2/3)
  • Upcoming GST Council meeting: expected before mid-July 2026
  • Platforms involved: Ola, Uber, Rapido
On this page
  1. What Happened
  2. Static Topic Bridges
  3. GST Council: Structure and Decision-Making
  4. Section 9(5) of the CGST Act, 2017: E-Commerce Operator Tax Liability
  5. GST Rate Structure and Cascading Effect Elimination
  6. Key Facts & Data
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