Monday, July 22, 2024

Shift in Strategy: Ola and Uber Adopt Subscription-Based Models for Auto-Rickshaw Drivers

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Now, Ola And Uber Unveil Subscription-Based Models For Auto Drivers

In a notable shift from their traditional commission-based revenue model, popular ride-hailing services Ola and Uber are now embracing subscription-based models for auto-rickshaw drivers. This new strategy echoes the approaches of competitors such as Namma Yatri and Rapido, marking a significant change in the way these platforms engage with their driver partners. Rather than charging a commission or booking fee for each ride, the subscription model allows drivers to access an unlimited number of rides for a fixed daily or weekly fee.

Recent reports highlight that Ola has already rolled out this model for its auto-rickshaw drivers in several key markets, including Delhi-NCR, Mumbai, Bangalore, and Hyderabad. Uber is not far behind, having initiated a similar program in six cities, starting with Chennai, Kochi, and Visakhapatnam. This shift towards a subscription model is poised to potentially streamline operations for Ola and Uber by avoiding the 5% Goods and Services Tax (GST) that is applicable to auto-rickshaw rides booked through these platforms.

The implementation of the subscription model comes amid discussions regarding the GST implications for ride-hailing services. Under the current tax framework, platforms like Ola and Uber are required to collect and remit GST on behalf of their service providers, which includes drivers, thanks to Section 9(5) of the Central GST Act. The move to a subscription model raises questions about the tax obligations of these platforms, especially following a September 2023 advance tax ruling which exempted Namma Yatri from collecting and paying GST. Tax experts remain watchful, anticipating how this development might unfold in potential disputes with tax authorities due to the ambiguity surrounding this exemption’s applicability to other ride-hailing operators.

Traditionally, Ola and Uber have withheld a portion of the fare from each ride as a commission, passing the remainder to their driver partners. However, under the new subscription scheme, the platforms are changing their role to providing visibility to drivers for a certain fee without handling online payments or setting the pricing for rides. Essentially, this model represents a shift towards offering software-as-a-service (SaaS) to driver partners, simplifying the transaction process while also potentially mitigating tax liabilities.

This strategic pivot arrives at a crucial time for Ola, particularly for its electric vehicle arm, Ola Electric, which is reportedly finalizing plans to launch its electric autorickshaw, possibly named Raahi. This launch is aimed squarely at consumers and represents a significant investment in the future of eco-friendly transportation solutions.

Furthermore, this development is a bright spot for ANI Technologies Pvt Ltd, Ola’s parent company, which has seen a notable reduction in its net losses. The company successfully decreased its consolidated net loss by 49.2% to INR 772.2 crore for the fiscal year ending March 31, 2023, down from INR 1,522.3 crore in FY22. This improvement in financial health underscores the importance of innovation and adaptability in the dynamic ride-hailing market.

As Ola and Uber transition to this new business model, it will be interesting to observe how these changes influence the ride-hailing landscape, driver earnings, and the overall user experience. This novel approach could set a precedent for how ride-hailing platforms operate, highlighting the industry’s potential for continual evolution in response to regulatory and market demands.

Alex Sterling
Alex Sterlinghttps://www.businessorbital.com/
Alex Sterling is a seasoned journalist with over a decade of experience covering the dynamic world of business and finance. With a keen eye for detail and a passion for uncovering the stories behind the headlines, Alex has become a respected voice in the industry. Before joining our business blog, Alex reported for major financial news outlets, where they developed a reputation for insightful analysis and compelling storytelling. Alex's work is driven by a commitment to provide readers with the information they need to make informed decisions. Whether it's breaking down complex economic trends or highlighting emerging business opportunities, Alex's writing is accessible, informative, and always engaging.

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