Introduction
In this era of digital transformation, the transportation industry is witnessing a paradigm shift. The advent of ride-hailing apps and taxi aggregators has revolutionized the way people commute. However, a contentious issue surrounding taxi fare in India has emerged: is it subject to the Goods and Services Tax (GST)?
GST on Taxi Fare: The Legal Landscape
To understand the applicability of GST on taxi fare, it is essential to delve into the legal framework.
The GST Act
The Goods and Services Tax Act, 2017 (GST Act) defines “goods” as “every kind of movable property other than money and securities.” Taxi fare, being a form of compensation for the transportation of passengers, is not considered a “good.”
Taxi Services as “Transportation of Passengers”
Section 13 of the CGST Act exempts “transportation of passengers” from GST. This exemption extends to both intra-state and inter-state transportation.
Court Rulings on GST Applicability
The interpretation of the GST Act has been subject to judicial scrutiny.
The Gujarat High Court Ruling
In 2022, the Gujarat High Court ruled that taxi fare is not subject to GST, reaffirming the exemption under Section 13. The court held that transportation of passengers is a bundled service where the primary purpose is to move individuals from one place to another.
The Allahabad High Court Ruling
In contrast, the Allahabad High Court held in 2020 that taxi fare is subject to GST. The court reasoned that the act of transporting passengers involves the provision of amenities and conveniences, which constitutes a taxable supply.
Current Scenario and Implications
The conflicting rulings have created uncertainty in the industry. While some states adhere to the exemption, others impose GST on taxi fare.
Tax Implications for Taxi Operators
The GST liability for taxi operators depends on the state in which they operate. In states where GST is applicable, operators must collect and remit GST at the prescribed rate. Non-compliance can result in penalties and interest charges.
Consumer Impact
The inclusion of GST in taxi fare would lead to an increase in transportation costs for consumers. This could negatively impact the affordability and convenience of using taxis.
Conclusion
The question of whether taxi fare is subject to GST remains a subject of debate. While the legal provisions and court rulings provide guidance, the inconsistent application of GST across states has created confusion. To address this, the GST Council should provide clear guidelines to ensure uniformity and clarity. Nevertheless, it is essential to note that the exemption for “transportation of passengers” under Section 13 of the GST Act provides a strong argument for the exclusion of taxi fare from GST.
