Uniformity
is not blindness.
Why digital tax policy must examine what platforms actually do
India’s own regulators, tax circulars and courts distinguish technology, intermediation and the underlying commercial activity. Passenger-platform policy deserves the same examination.
Consider two businesses with similar-looking apps. One sets commercial terms, organises payment and assumes responsibility for the transaction. The other supplies software to independent people who agree their own terms and perform their own services. The screens may look alike. The allocation of power, money and responsibility may not.
A visible difference is not ipso facto decisive in law. But a demonstrated difference in price control, money flow or contractual responsibility calls for examination of its legal relevance. Declaring an approach “model-agnostic” does not complete that examination.
The proper question is not whether every business model deserves its own tax rule. It is whether the same objective criteria have been applied to materially different operations. This is the basis of TLGS’s proposal for a verifiable technology-only passenger-platform category—not an automatic privilege for a brand or a subscription label.
The distinction is already familiar to the tax system
Handling funds is different from routing technology
RBI’s 15 September 2025 Directions define a payment aggregator by aggregation and subsequent settlement of customer payments to merchants. A payment gateway supplies the processing infrastructure without handling the funds. Paragraph 10(g) expressly places a gateway outside those Directions, while encouraging adoption of the baseline technology recommendations.1
The distinction has practical consequences. A non-bank aggregator requires authorisation; the Directions prescribe minimum net worth of ₹15 crore at application and ₹25 crore by the end of the third financial year after authorisation, and require merchant funds to be maintained in an escrow account. These are obligations tied to the activity, not merely to an online interface.1
This shows that a technology boundary can be defined and supervised. It does not transplant RBI’s rule into GST or make non-collection of fares decisive by itself. It supports asking which passenger-platform functions justify the proposed additional responsibility.
GST itself adopts the payment-function distinction
CBIC’s 28 January 2025 circular, paragraphs 3.4–3.6, distinguishes the same activities. It treats RBI-regulated aggregators undertaking qualifying card-payment settlement as falling within the relevant “acquiring bank” explanation. The specified exemption covers settlement of an amount up to ₹2,000 in a single qualifying card transaction; it does not cover payment-gateway services.2
The direction of the benefit matters: this exemption favours the qualifying settlement function, not technology-only gateways. It is therefore evidence for functional classification—not a proposition that software must always receive lighter tax treatment.2
The Department already looks behind the digital interface when applying GST. The question is why the proposed distinction between mobility software and an organised transport transaction should not receive a similarly reasoned analysis.
Uniform implementation requires examining the facts
Issued on 20 September 2021 to promote uniform implementation, the intermediary-services circular differentiates arranging another person’s supply from supplying a service on one’s own account. Its examples distinguish a person helping conclude a machinery sale from a subcontractor developing a software module—even where the subcontractor interacts with the ultimate client. Outsourced customer care is another own-account service in the example given.3
Paragraph 5 warns against treating those service categories as inherently intermediary or non-intermediary: the specific facts and contract terms must be examined.3
The IGST “intermediary” definition is not the Section 9(5) test. But the administrative lesson is direct: a common classification method can yield different outcomes without sacrificing uniformity. Industry names and three-party arrangements do not replace the statutory inquiry.
Commerce and consumer policy do not collapse every platform into one role
Facilitating a marketplace is different from owning its inventory
The 26 December 2018 policy text defines an inventory model by ownership of goods or services sold directly to consumers, and a marketplace by its facilitation of buyer–seller transactions. It addresses inventory control, pricing influence and seller responsibility. Ownership or control over inventory changes the character of the business under that framework.4
The text also permits marketplace support services such as warehousing, logistics, fulfilment and payment collection. A marketplace is therefore not automatically a passive software supplier. The value of the example lies in the examination of ownership and commercial control, not in equating every marketplace with Rapido’s proposed category.4
Passenger mobility likewise requires examination of who organises the economic activity. A platform’s legal and operational role should be established before a common consequence is assigned. The FDI outcome need not be copied for its analytical discipline to be useful.
Common consumer protection; responsibilities matched to role
The structure of the Consumer Protection (E-Commerce) Rules, 2020 makes the point particularly clearly. Rule 4 provides duties for e-commerce entities generally. Rule 5 addresses marketplace entities, rule 6 the sellers using marketplaces, and rule 7 inventory-based entities. The original framework thus combines common obligations with role-specific responsibilities.6
A technology-only passenger category need not mean weaker consumer protection. Safety, identity verification, transparent information and effective redress should remain. The further question is which entity should bear the underlying transport and tax obligations. Protecting a passenger and identifying the supplier of the ride are related but distinct inquiries.
Across these examples, differentiation is a tool of governance. It is not a concession to be withheld because an industry has become complex. The necessary discipline is to explain why a difference matters to the particular rule.
The courts examine relationships and consequences—not labels alone
Commercial distribution did not automatically establish agency
In Bharti Cellular Ltd. v. ACIT, the issue was withholding under Section 194H on distributor/franchisee earnings from prepaid telecom products. The Court held the assessees were not obliged to deduct on the income in issue. Paragraph 9 directs attention to functions, responsibilities and obligations; paragraphs 33–34 distinguish Singapore Airlines, where the agency relationship and supplementary-commission settlement mechanism were materially different.7
Paragraph 35 adds a practical point: where views diverge, CBDT may usefully clarify after ascertaining assessee and stakeholder views, with prospectivity where justified. That was a contextual observation, not a general order granting a hearing or retrospective immunity.7
The analogy supports examining the actual commercial relationship and consulting on workable treatment. It does not import the income-tax agency test into GST. A label cannot create liability—or erase it—without the relevant statutory conditions.
Possession, payment and deposit are not interchangeable facts
In Indore Development Authority v. Manoharlal, the Constitution Bench’s Section 24 analysis distinguished taking possession, paying or tendering compensation, and depositing compensation. Subject to the statutory period and conditions, lapse requires both non-possession and non-payment; non-deposit does not by itself produce lapse. Different factual situations can instead lead to different compensation consequences.8
This is a supporting analogy, not a GST precedent. One framework can demand different results where the legally relevant facts differ. The useful principle concerns material facts—not an assertion that every small variation changes the law.
Section 9(5) is already a differentiated allocation of liability
Section 9(5) creates a special mechanism: for notified services supplied through an electronic commerce operator, the operator is treated as the supplier liable to pay the tax. This departs from the ordinary supplier-based allocation. The question is the justified boundary of that special responsibility.9
The notified framework recorded in the GST Council’s published materials contains express qualifications. Accommodation and housekeeping entries distinguish whether the underlying supplier is liable for registration under Section 22(1). The omnibus entry distinguishes a company supplying the service. The restaurant entry excludes services from specified premises.10
These are boundaries of ECO liability—not necessarily exemptions from tax on the underlying service. Nor must one service inherit another service’s qualification. Their significance is narrower and stronger: the framework already makes category-specific choices.
The strongest objection deserves a direct answer
The Revenue’s answer may be that every covered platform shares the relevant feature: a notified service is supplied through it. Different pricing or funding arrangements might then be immaterial to the chosen collection rule. That is a serious statutory and policy argument. Section 9(5) does not expressly make fare collection, commission income or ownership of a fleet universal preconditions.9
The response must therefore demonstrate more than a change from commission to subscription. It must explain why the proposed absence of transaction control, settlement responsibility or contractual undertaking should affect the reach of platform liability—and how that distinction can be enforced. Lawmakers may choose a broad rule, but the economic consequences and competing options should be examined before doing so.
The passenger-platform judgment makes the factual task more important
The Delhi High Court’s 12 April 2023 decision in Uber India Systems upheld the challenged notifications. Its reasoning considered bundled services and the responsibilities assumed by the platforms before it; it rejected the claim that they merely supplied a booking method. The judgment also rejected any vested entitlement to a tax exemption.11
We should neither ignore that decision nor describe it as approving a technology-only carve-out. A materially different proposal must be demonstrated in the product and contracts, and considered through the proper legal route. Uniformity can justify disregarding an irrelevant difference. It cannot, by itself, answer whether a demonstrated difference is irrelevant.
Turn the distinction into an auditable proposal
TLGS proposes a common, cumulative qualification test, open to every eligible platform. An operation should qualify only while its contracts and actual product satisfy the prescribed conditions. The examination should separate existing features from changes proposed for qualification.
Who agrees the final fare?
Test whether an estimate is genuinely non-binding and whether the app imposes a fare or surge multiplier.
Who receives and accounts for the fare?
Trace the complete payment flow and identify who invoices for transport and who invoices for software.
Who undertakes the journey?
Identify the contractual supplier, performance commitments and allocation of service risk.
Can the driver decline freely?
Examine acceptance rules, commercial de-ranking and penalties—not only the wording of the terms.
Is the platform underwriting the transaction?
Examine trip-linked subsidies, earnings guarantees, fleet arrangements and obligations in substance.
Does the product remain within the boundary?
Require evidence, disclosure of material changes and proportionate audits; prevent relabelling without operational change.
Safety checks, identity verification and statutory consumer protections should remain essential. Their existence should be examined in context, rather than treated as automatically proving commercial control. A structured platform-level review can be supplemented by transaction sampling; the proposal does not require a fresh legal classification for every ride.
The outcome should matter to the driver and the next Indian founder
In an illustration—not a statement of current tariffs—a ₹400 fare less 20% commission leaves ₹320 after the platform charge. A ₹100 daily pass spread across ten rides costs ₹10 per ride, leaving ₹390. At a ₹360 fare with the same allocated app cost, the driver retains ₹350: the passenger pays ₹40 less and the driver retains ₹30 more than in the commission example. These figures are before GST, fuel, vehicle and other costs; usage changes the pass cost per ride.
Lower distribution costs create room for gains; they do not guarantee them. Young drivers need a path beyond subsistence, and young software founders need room to compete without reproducing every function of a capital-intensive platform. Section 9(5) does not itself require commissions or fleets. The policy concern is whether a blanket allocation of compliance and collection burdens unnecessarily narrows the space for a genuinely different business. That effect should be tested, not presumed.
Hear the model. Record the reasons. Then choose the instrument.
TLGS’s substantive proposal is an objectively defined category in which a qualifying technology-only provider would not bear the independent driver’s ride-tax liability under Section 9(5), while its software service remains taxable as applicable. That outcome must rest on demonstrated functions and safeguards, through the legally competent route—not a brand-specific concession.
TLGS seeks a focused examination supported by the Prime Minister’s Office and the Ministry of Finance, involving the Revenue Department, CBIC, relevant State tax administrations, proposing platforms, driver and consumer representatives, and independent technical expertise. The proposing platform should demonstrate its product; the administration should identify the risks and objections; both should address the same operational evidence.
The Joint Stakeholder Committee should determine whether the proposed distinction is genuine, material to the allocation of tax responsibility, and administrable. It should also assess driver-income effects, offline/online parity for truly comparable services, new-entry costs and revenue safeguards. An internal administrative view should inform that discussion, not substitute for it.
Where the distinction is supportable within the Act, an appropriately framed clarification may resolve interpretive uncertainty. Where a notified category requires adjustment, the notification route must remain within the enabling law. Where the statute itself must change, legislation is required. A Section 168 circular cannot override an Act. Necessary Council consideration and approval should precede a change of policy. Agenda & Minutes must faithfully record the prior proceedings; a new policy outcome requires a properly approved decision, not merely a change in the record.9
Any proposed expansion should address commencement, a workable transition and the treatment of earlier periods expressly. These protections are additional to—not a replacement for—considering the substantive technology-only proposal on its merits.
This article advances a policy proposal. It does not report a new Section 9(5) exemption, certify any current Rapido product as qualifying, or determine a platform’s past or present tax liability.
Sources & precise reference points
Linked primary instruments and judgment texts support the factual examples. The mobility applications and proposed test are TLGS’s analysis. Dated policy examples are not a complete compliance guide to their respective sectors.
Regulation of Payment Aggregators Directions, 2025 ↗
15 September 2025; paragraphs 4(i)–(j), 5(b), 6(a), 10(g) and 16(a). PA/PG definitions and differentiated regulation.
Circular 245/02/2025-GST ↗
28 January 2025; paragraphs 3.1–3.6. Qualifying card-settlement exemption; PG services excluded.
Circular 159/15/2021-GST ↗
20 September 2021; paragraphs 3–5, particularly illustrations 1, 2 and 4. Own-account supply, intermediation and case-specific facts.
Review of FDI policy on e-commerce ↗
26 December 2018; policy paragraphs 5.2.15.2.2–5.2.15.2.4. Marketplace, inventory ownership/control and support services.
Press Note 3 (2026 Series) ↗
23 July 2026; proposed paragraph 5.2.15.2.5 and commencement clause. Export-specific policy qualification; not a general domestic-market relaxation.
Consumer Protection (E-Commerce) Rules, 2020 ↗
G.S.R. 462(E), 23 July 2020; rules 4–7. Original rule structure; primary text reproduced by ConsumerProtection.in.
Bharti Cellular Ltd. v. ACIT ↗
28 February 2024; Civil Appeal 7257/2011; paragraphs 9, 33–35 and 42. Official judgment.
Indore Development Authority v. Manoharlal ↗
6 March 2020; (2020) 8 SCC 129; concluding answers on Section 24, especially possession, payment and deposit. Judgment text reproduced by Indian Kanoon.
Central Goods and Services Tax Act, 2017 ↗
Sections 2(44)–(45), 9(1), 9(5) and 168. Statutory allocation of liability and the scope of administrative clarification.
55th meeting: published agenda and record ↗
Notified categories under Notification 17/2017–Central Tax (Rate), as recorded: registration, omnibus-company and specified-premises qualifications.
Uber India Systems Pvt. Ltd. v. Union of India ↗
12 April 2023; 2023:DHC:2489; particularly the analysis of bundled services and the rejection of the notification challenge. Judgment text reproduced by Indian Kanoon.