The government official stated that the imposition of the levy had been deemed justified and legally approved following the appeal of electronic commerce operators to the Delhi High Court.
Industry executives noted that the application of a 5% GST on online purchases of non-AC auto-rickshaw or bus rides through platforms like Ola, Uber, MakeMyTrip, and redBus has led price-sensitive consumers to opt for offline options to avoid the tax.
According to three executives who requested anonymity, the percentage of such transactions decreased from 41% of the overall online bus ticket bookings in the fourth quarter of 2021 to 22% in the three months that concluded.
A government official, who preferred to remain anonymous, stated that the levy was justified and received legal endorsement when electronic commerce operators (ECOs) approached the Delhi High Court. The service provided through an ECO was subjected to GST as per a notification dated November 18, 2021, which became effective on January 1, 2022.
While the transportation of passengers, with or without accompanied belongings, by non-AC contract carriage other than radio taxi is exempt from GST, non-AC stage carriages were included in the tax ambit if the services or supplies were availed through ECOs, the official explained.
An executive from an e-commerce entity mentioned that Electronic Commerce Operators (ECOs) are contemplating raising the issue with the government again. He expressed, “The imposition of GST on bus tickets purchased through ECOs tends to discourage consumers from utilizing online systems, which goes against the government’s Digital India mission.”
Prakash Sangam, CEO of redBus, a bus ticketing platform, emphasized that the government should reconsider its decision, asserting that consumers of non-AC buses should have the right to benefit from the convenience of online systems. He stated, “The additional charge acts as a disincentive for online commerce in a price-sensitive segment. As strong advocates of the Digital India mission, imposing a tariff that hinders greater digital adoption is an unnecessary hindrance.”
A tax expert, an industry body representing founders and investors of Indian startups, expressed concern that the recent decision is not aligned with the government’s efforts to promote domestic startups. He highlighted that the GST council’s initial intention to exempt non-AC bus fares from GST aimed at providing relief to the economically disadvantaged population, particularly those relying on such services.
He cautioned that introducing GST on online ticket purchases for the same demographic could be counterproductive, hindering the original goals of fostering a digital India and enhancing transparency through online ticket sales.
Another tax expert pointed out the impact of the inconsistent GST policy implementation on digital integration within the transport system. He emphasized that the current scenario, where online platforms are required to impose a 5% GST while offline modes face no such charges, hampers digital penetration. Advocating for a standardized approach to policy implementation, also it suggested that uniformity would enhance efficiency and foster greater digital integration in the sector.
