• Notification Date: 15-01-2024
• Notification No: N/A

Travelers are shifting to Offline Mode after GST levy on non-AC Bus rides

The GST levy on non-AC bus rides is justified and has been legally endorsed when electronic commerce operators moved the Delhi high court, a government official said. 

The imposition of 5% GST on non-AC auto-rickshaw or bus rides bought online on platforms such as Ola, Uber, MakeMyTrip and redBus is seeing price-sensitive consumers shifting offline to save tax, industry executives said. 

The proportion of such transactions fell from 41% of the total online bookings of bus tickets in the fourth quarter of 2021 to 22% in the three months ended, three executives said, requesting anonymity. 

The levy is justified and has been legally endorsed when electronic commerce operators (ECOs) moved the Delhi high court, a government official said, declining to be named. This service supplied through an ECO was brought under GST through a November 18, 2021, notification, which came into force on January 1, 2022. 

Although transport of passengers, with or without accompanied belongings, by non-AC contract carriage other than radio taxi, for transportation of passengers (excluding tourism, conducted tour, charter or hire) are exempt from GST, non-AC stage carriages were brought under the tax net if services or supply are availed through ECOs, he said. 

The ECOs are considering taking up the matter with the government again, said an executive for an e-commerce entity. “The imposition of GST bus tickets purchased though ECOs in a way dissuades consumers from using online systems, something against the government’s Digital India mission,” he said. 

The government must review its decision as consumers of non-AC buses are entitled to avail the convenience of the online system, said Prakash Sangam, CEO of redBus, a bus ticketing platform. “The extra charge disincentivises online commerce for a price-sensitive segment. As big proponents of the Digital India mission, a tariff that disadvantages greater digital uptake is an unnecessary obstacle,” he said. 

The move is not conducive for the government’s focus on encouraging domestic startups, said Rameesh Kailasam, CEO of Indiatech.org, an industry body of founders and investors of India’s startups. “The large-hearted intent of the GST council to exempt non-AC bus fares from GST levy was to give relief to the poor and bottom of the pyramid that largely use such a service. To create a differentiation by imposing GST levy on such tickets when purchased online for the same segment of population may be counterproductive to the basic intent, digital India and increased transparency that would have arisen from online ticket sales,” he said. 

“Digital penetration in transport system is deeply affected by non-uniform GST policy implementation, where the online platforms are mandated to charge a 5% GST and offline modes have no GST charges,” said Nilaya Varma, CEO and co-founder of Primus Partners, a consultancy. “A uniform approach to policy implementation will promote the digital penetration in the sector and bring efficiency.”