In a recent ruling, the bench of Justice Manmeet Pritam Singh Arora and Justice Manmohan of Delhi High Court ruled that the impugned Notifications in withdrawing the exemption from the Electronic Commerce Operators (ECOs) and making the levy of Goods and Services Tax (GST), on the fare of non air-conditioned stage carriage ticket booked through the electronic platform of Petitioners is identical and not discriminatory.
The bench ruled against the electronic platforms including Uber and Ibibo and dismissed the petitions filed by them.
The writ petitions have been filed by Uber India Systems Private Limited (P1), Pragatisheel Auto Rickshaw Driver Union (P2) and IBIBO Group Private Limited along with Make My Trip (India) Private Limited (P3).
The petitions challenged the Clauses (iii) and (iv) of Notification No. 16/2021- Central Tax (Rate) and Clauses 1(i) and 2(i) of Notification No. 17/2021 – Central Tax (Rate), both dated 18.11.2021, as ultra vires to the Constitution of India and Section 9(5) and 11 of Central Goods and Service Tax Act, 2017 (CGST Act).
The parent notification of the contested notification was published in 2017, and it offered a complete exemption from paying GST in the following circumstances: i) services performed by auto rickshaws. ii) using a stage carriage that isn’t air-conditioned to transport passengers.
Regardless of the method of booking used by the customer, such as online/offline or offline agents, the individual autorickshaw driver, bus operator, and ECO were all eligible for the aforementioned exemption of tax on the “fare.”
Subsequently, the respondents issued impugned Notification dated 18.11.2021 amending the parent Notification and thereby withdrawing the exemption to the ECO’s granted vide the parent Notification for the aforesaid services.
As a result, starting on January 1, 2022, the “fare” for reservations made by customers through an ECO’s electronic platform for an auto-rickshaw or bus journey will be subject to tax.
The petitioner submitted that a levy of GST has to be premised on the nature of the service availed by the consumer and not on the basis of the medium used by the said consumer for availing the service.
The purpose behind exempting auto-rickshaw drivers is that the said drivers are not in a position to bear the burden of compliance of the provisions of the Act of 2017.
The respondent’s counsel claimed that since GST is an indirect tax, consumers—rather than the ECO—are responsible for paying it. Thus, operators that provide their services through ECOs are not now burdened with GST compliance requirements.
To the issue that the impugned Notifications does not result in an artificial discrimination and classification based on the ‘mode of booking’, the court noted that there is a principal-to-principal relationship between the ECOs, the customer, and the vendor. Furthermore, it is made quite clear in the petitioners’ statement on their website that they are not acting on behalf of the bus drivers and auto-rickshaw drivers.
Moreover, the ECOs are providing a bundle of services and partake in a charge/commission from both the consumers and the individual supplier. Therefore, for all purposes, the ECOs are an independent supplier of service to the consumer. Hence, the impugned Notifications do not result in discrimination on the basis of the mode of booking.
The intention of Section 9(5) of the CGST Act is to plug leaks in collection of GST and therefore, the Respondent is empowered under the said section to consolidate the liability to collect and pay tax for the services supplied through ECO.
The ECOs are a separate class, in the opinion and judgement of the High Court, and the Respondents have every right to deny the stated class exemption. There is no vested right in the ECOs to claim the continuation of exemption.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan Premium. Follow us on Telegram for quick updates.
