Travellers Opting for Offline Mode as GST is Applied to Non-AC Bus Rides

The implementation of a 5% GST on non-AC auto-rickshaw or bus rides purchased online through platforms like Ola, Uber, MakeMyTrip, and redBus is prompting cost-conscious consumers to shift offline to avoid the tax, according to industry executives.

The percentage of such transactions has dropped from 41% of the total online bookings for bus tickets in the fourth quarter of 2021 to 22% in the three months ending, according to three executives who requested anonymity.

The government official justified the levy, stating it had been legally endorsed when electronic commerce operators (ECOs) moved the Delhi High Court. The service provided through an ECO was brought under GST through a November 18, 2021, notification, which came into effect on January 1, 2022.

Although the transport of passengers by non-AC contract carriage other than radio taxi is exempt from GST, non-AC stage carriages were brought under the tax net if services or supply are availed through ECOs, the official mentioned.

ECOs are considering taking up the matter with the government again, as the imposition of GST on bus tickets purchased through ECOs discourages consumers from using online systems, contrary to the government’s Digital India mission, an executive for an e-commerce entity stated.

A bus ticketing platform industry expert argued that the government should review its decision as consumers of non-AC buses should be able to avail the convenience of the online system. He emphasized that the extra charge disincentivizes online commerce for a price-sensitive segment and hinders the Digital India mission.

Another industry expert from an industry body of founders and investors in India’s startups highlighted that the move is not conducive to the government’s focus on encouraging domestic startups. He stated that the imposition of GST on online non-AC bus tickets contradicts the GST council’s intent to exempt such fares for the poor and the bottom of the pyramid.

The inconsistent GST policy implementation, where online platforms are mandated to charge a 5% GST while offline modes have no GST charges, is adversely affecting digital penetration in the transport system, according to one of the experts. He emphasized the need for a uniform approach to policy implementation to promote digital penetration in the sector and enhance efficiency.

Source: Travellers shifting to offline mode after GST on non-AC bus rides