The recent imposition of a 5% Goods and Services Tax (GST) on non-AC bus rides booked online, affecting platforms like Ola, Uber, MakeMyTrip, and redBus, is prompting price-sensitive consumers to migrate towards offline options to avoid the tax burden, according to industry executives. This shift is reflected in the declining proportion of online transactions for non-AC bus tickets, raising concerns among electronic commerce operators (ECOs) who are considering taking up the matter with the government.
Impact on Online Bookings: The percentage of online transactions for non-AC bus tickets dropped from 41% in the fourth quarter of 2021 to 22% in the following three months, highlighting a significant change in consumer behavior post-GST implementation. The tax on such transactions was legitimized through a November 18, 2021, notification, which came into effect on January 1, 2022.
Government’s Stance and Industry Response: While the government justifies the levy and cites legal endorsement, industry executives argue that the move discourages consumers from using online platforms, contradicting the government’s Digital India mission. ECOs are contemplating engaging with the government to reconsider the decision, emphasizing the impact on the Digital India initiative.
Calls for Review: Stakeholders in the industry, including Prakash Sangam, CEO of redBus, express concerns about the extra charge, asserting that it disincentivizes online commerce for a price-sensitive segment. Rameesh Kailasam, CEO of Indiatech.org, underscores that the GST council’s initial intent to exempt non-AC bus fares from GST was to provide relief to a specific demographic. The recent imposition on online purchases for the same population segment is seen as potentially counterproductive to the government’s broader objectives.
Advocating Uniformity in GST Policy: Nilaya Varma, CEO, and co-founder of Primus Partners, a consultancy, emphasizes the need for a uniform approach to policy implementation. Varma suggests that the current non-uniform GST policy is hindering digital penetration in the transport sector and advocates for a consistent and streamlined approach to promote efficiency.
In conclusion, the imposition of GST on non-AC bus rides booked online has sparked a shift in consumer behavior, with travellers opting for offline modes to avoid additional taxes. Industry stakeholders are calling for a review of the decision, stressing the potential counterproductivity to the government’s broader initiatives.