Ola and Uber, the ride-hailing giants are rolling out a subscription model for auto-rickshaw drivers, ditching the traditional commission on every ride.

What Happened: This new approach, already in motion in cities like Delhi-NCR, Mumbai, Bangalore, Hyderabad, Chennai, Kochi, and Visakhapatnam, mirrors strategies by newer players Namma Yatri and Rapido, aiming to offer something fresh to drivers amidst a competitive market.

According to an ET report, auto drivers can take unlimited rides without Ola and Uber taking a slice of each fare by charging a flat daily or weekly fee. This setup benefits drivers by potentially increasing their earnings but also helps Ola, and Uber skirt around a 5% goods and services tax (GST) on auto rides.

However, this clever workaround might not be all smooth driving. Tax experts are waving caution flags, suggesting possible future tiffs with tax authorities over the applicability of a GST ruling favouring Namma Yatri to others.

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Not without problems: The essence of this pivot to a subscription or Software-as-a-Service (SaaS) model by Ola and Uber, as they steer away from their commission-based revenue roots, is to stay competitive. This strategy lowers costs by avoiding the 5% GST but also locks in driver engagement through a sense of investment. Yet, it surrenders control over ride pricing to the drivers, marking a significant shift in how ride fares might be determined moving forward.

This transition is not without its critics and complexities. With the advance ruling on GST’s applicability to Namma Yatri not necessarily a blanket pass for all, the road ahead for Ola, Uber, and their ilk could see regulatory bumps. Tax experts suggest a cautious approach, hinting at possible government actions to safeguard tax revenues as this model gains traction. As the dust settles, clarity and compliance will be key for ride-hailing platforms navigating these new subscription waters.

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