AAR ruling could offer advantages to e-commerce platforms facilitating logistic

In a recent development, the GST Authority for Advance Rulings (AAR) in Karnataka has ruled that Juspay Technologies, the company operating the ride-hailing app ‘Namma Yatri,’ qualifies as an e-commerce operator under GST regulations. However, the AAR has clarified that the Bengaluru-based firm is not obligated to collect and remit GST on transportation fares because the supply of passenger transportation does not occur “through” their platform, as reported by The Times of India (TOI).

According to Section 9(5) of the GST Act, e-commerce operators are mandated to collect and remit GST for specific “notified” services. The AAR’s decision underscored that the services provided by auto drivers to their passengers are not categorized as a supply by JustPay Technologies.

It’s crucial to bear in mind that AAR rulings do not establish legal precedents but can exert an influence on similar cases. Harpreet Singh, an indirect tax partner at KPMG-India, explained to TOI, “According to this ruling, if an entity merely connects service providers and end customers without actively participating in the transaction or exerting control over the service provision, it would not be considered a supply of service ‘through’ the entity. Consequently, entities facilitating notified services would not be liable for GST collection and payment.”

This ruling may have implications for the GST liability of e-commerce operators offering services covered under section 9(5), such as passenger transportation, restaurants, housekeeping, and hotel accommodation.

Pratik Jain, a partner at Pricewaterhouse, highlighted the ambiguity in the term “supplies made through e-commerce operator,” which lacks precise definition. He cautioned that the AAR’s reliance on dictionary definitions and common usage could lead to interpretation variations by GST authorities, necessitating a case-specific analysis to determine the applicability of section 9(5).

According to a TOI report, Jain also referred to a previous ruling by the Appellate Authority of Advance Ruling (AAAR) in the case of OPTA cabs, emphasizing the significance of evaluating the specific business models to ascertain GST obligations. In the case of ‘Namma Yatri,’ the app functioned solely as a connector between auto drivers and passengers. Passenger transportation was conducted independently, with the app having no control over service provision details. There was no centralized call center or control room, and payments were directly collected by the auto drivers without being tracked through the app.