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Uber has adopted a cash-only approach for auto rickshaw rides, following competitors Namma Yatri, Rapido, and Ola, despite inconsistent tax decisions from the Authority for Advanced Ruling (AAR) on whether ride aggregators must continue to collect Goods and Services Tax (GST) from passengers.

Since February 18, when it switched to a subscription model for its auto drivers, Uber has stopped charging 5% GST on auto rides, which it previously collected under its commission-based model.

The Karnataka bench of the AAR concluded in November 2024 that Uber is still required to collect and pay 5% GST under the subscription model, even if it does not collect any payment from passengers.

In contrast, the same panel ruled in September 2023 on Namma Yatri’s application that it was not required to collect GST from passengers because it merely connects drivers and passengers and is not directly involved in the transportation services.

Passengers must now pick ‘cash’ as their payment method and can pay the fare directly to auto drivers, who, in turn, pay a membership fee to Uber for platform access.

Because no GST is levied on passengers, Uber only generates a receipt and “not a tax invoice” upon conclusion of auto rides. The reciept is not a tax invoice, as Uber says that transactions between passengers and drivers take place independently of its platform.

Under Section 9(5) of the CGST Act of 2017, which specifies GST rates for services offered by e-commerce operators, ride aggregators are charged 5% GST for passenger services. According to official estimates, GST revenue from passenger transport services under the section will be Rs.1,545 crore in 2023-24.

The industry has contacted tax authorities to clarify the 5% penalty imposed under the subscription model for ride aggregation.

Ride-hailing apps hope to recruit more auto drivers to their platforms by transitioning from commissions that absorbed up to 30% of drivers’ daily profits to fixed subscription rates.

Uber adopted the approach after competitors Namma Yatri, Rapido, and Ola did the same, fearing loss of market share in the three-wheeler area. While Namma Yatri and Rapido have also shifted to subscription fees for cab drivers, Ola and Uber, which have a stronger presence in the four-wheeler industry, have yet to do the same for cabs.

Uber and Ola did not return calls for comment.

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