Karnataka High Court Pulls Up CBIC For Non-Compliance, Seeks Clarity On Applicability Of S. 9(5) CGST Act To Uber's 'Subscription' Model

Justice S.R. Krishna Kumar also directed the CBIC to place the matter before the GST Council, if required, and file a status report.

Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017, is a special provision under the reverse charge mechanism that mandates an Electronic Commerce Operator (ECO) to pay GST on specific services supplied through its platform.

In the case at hand, the Uber India Systems Pvt. Limited/ assessee, an electronic commerce operator, was liable to pay GST vis-à-vis the passenger transportation fares earned by drivers for the passenger transportation service mediated through their platform.

Background

Traditionally, in the passenger transportation service segment, Uber India and other such companies worked on a 'commission' model, meaning that, for allowing the riders to access their application and book a ride, they used to charge a per-ride 'commission' for the service of facilitating the passenger transportation ride.

A similar 'commission' was also typically charged by the drivers as well who accessed the application. Such 'commission' was generally charged on a per-ride basis, i.e., for each activity of connecting the driver with a customer, companies used to charge 'commission'.

On such 'commission', GST at the rate of 18% was discharged. In addition to this GST liability, the Company also used to discharge GST at the rate of 5% on the passenger transportation fare in terms of Section 9(5) of the CGST Act.

In the last couple of years, various companies introduced a new model known as the 'subscription' model. In the 'subscription' model, the companies typically charge a fixed subscription fee from the drivers accessing their application instead of charging a 'commission' for each ride intermediated by them.

Accordingly, a GST position was adopted that the passenger transportation services are not provided 'through' such electronic commerce operator (an important condition for applicability of Section 9(5)) and hence, on the 'subscription' model, GST under Section 9(5) need not be discharged.

Present Scenario

A few companies approached the Authority for Advance Ruling (“AAR”) in Karnataka to seek a ruling on whether Section 9(5) applies to the 'subscription' model or not.

The AAR ruled that the passenger transportation services in a 'subscription' model are not provided 'through' such electronic commerce operators and hence Section 9(5) is not applicable.

Uber also introduced its 'subscription' model and sought a ruling before the AAR. However, the AAR held that Section 9(5) is applicable, overlooking the previous rulings rendered by the same authority.

Due to the foregoing, Uber India filed multiple representations before CBIC requesting it to issue necessary clarifications in terms of Section 168 of the CGST Act to ensure uniformity in tax positions.

Uber India filed a writ petition before the Karnataka High Court seeking a direction to the CBIC to decide the representations filed by the Company and to issue necessary clarifications regarding the applicability of Section 9(5) of the CGST Act, to the 'subscription' model.

The High Court vide its interim order dated 25 September 2024 directed CBIC to hear the relevant stakeholders and issue necessary directions. However, instead of issuing any directions, CBIC referred the matter to the Goods and Services Tax (“GST Council”).

The Court repeatedly questioned CBIC as to why the interim directions have not been complied with despite repeated orders and the undertaking provided.

In view of the above, the bench directed the CBIC to comply with the interim directions already issued as expeditiously as possible and submit a status report on the next date of hearing.

The bench has further directed that the CBIC should endeavour to ensure that the subject matter is placed on the agenda item of the GST Council meeting, if the same is convened prior to the next date of hearing.

The bench listed the matter on 30.01.2026.

Case Title: Uber India Systems Pvt. Ltd. v. Authority for Advance Ruling

Case Number: WP 25497/2024

Counsel for Petitioner/Assessee: T. Suryanarayana and Tharun Gulati

Counsel for Respondent/Department: Aravind Kamath