India’s ride-hailing industry weighs zero commission as drivers eye Rs 1.36 lakh more

New Delhi: India's ride-hailing industry, now the world's third-largest by revenue, is facing renewed pressure to overhaul its economics as new research shows drivers could take home nearly Rs 1.4 lakh more a year under a 'zero-commission' model built on open digital networks.

The findings, drawn from a study by Open Network for Digital Commerce (ONDC) on the sector, arrive as India's app-based taxi market -- valued at USD 7.53 billion in 2024 -- is projected to grow 9.09 per cent annually to reach USD 11.64 billion by 2029, with the user base expected to swell to 380.6 million riders.

That growth has made the sector a cornerstone of urban transport and employment: Uber alone works with more than a million drivers in India, while Ola has previously reported engaging 2.5 million drivers across two-, three-, and four-wheeler categories.


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But the study argues that the industry's current structure leaves both drivers and passengers worse off than it should.

Drivers typically surrender 20-30 per cent of their fares in commissions to platforms, a cut compounded by a 5 per cent GST on the base fare and an 18 per cent GST on the commission itself -- before fuel, maintenance and other operating costs are even factored in.

The result, researchers say, is chronic income volatility, no access to social security, and vulnerability to algorithmic fare disputes and account suspensions. Riders, meanwhile, continue to report cancellations, inconsistent service, and poor coverage in India's smaller tier-2, tier-3 and tier-4 cities.

THE CASE FOR OPEN NETWORKS

The study points to two structural fixes already gaining traction: open network models, such as the government-backed Open Network for Digital Commerce (ONDC), and zero-commission software-as-a-service (SaaS) platforms.

Open networks aim to break apart the closed ecosystems built by dominant ride-hailing apps, allowing drivers and passengers to transact across multiple platforms rather than being locked into one. Proponents say this fosters competition, lowers barriers for smaller operators, and widens access in underserved regions. Zero-commission SaaS platforms go a step further on driver economics: rather than taking a cut of every fare, they charge drivers a flat software fee, allowing them to retain 100 per cent of what they earn from riders.

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The study describes this zero-commission approach as having "emerged organically" as the preferred model among current participants in ONDC's network -- a signal, researchers suggest, that the market is already moving in this direction without regulatory compulsion.

HOW THE SAAS MODEL WORKS -- AND WHY TAX LAW HASN'T CAUGHT UP

The distinction between the two business models is more than semantic, according to a separate study of India's technology-enabled transport sector, based on surveys of more than 2,100 drivers and passengers across 13 cities.

Uber and Ola traditionally operated under a commission-based model and have now transitioned to a SaaS model. Rapido and Namma Yatri were launched and have been operating under a SaaS model for 3W and 4W from the outset.

Under this model, passengers negotiate the fare directly with drivers and settle the payment with them, while drivers retain the full amount. This gives drivers greater control over their earnings.

That structural difference has put the sector on a collision course with India's tax code. Under Section 9(5) of the Central Goods and Services Tax Act, GST liability for passenger transport booked through an e-commerce operator is shifted from the driver to the platform itself -- a provision introduced in 2017, when commission-based aggregators that controlled fares and payments were the industry norm.

Applying the same rule to subscription platforms, the study argues, is not workable, since these platforms have no visibility into what passengers actually pay drivers. "A platform cannot remit tax on a transaction value that it does not collect and has no line of sight on," the report said.

Most individual drivers, meanwhile, fall well under the Rs 20 lakh annual turnover threshold that would otherwise require them to register for GST directly -- meaning the tax question hinges almost entirely on how Section 9(5) is interpreted for platforms that neither price nor process fares.

That interpretation is currently inconsistent. The Authority for Advance Rulings in Karnataka has issued divergent decisions, finding some subscription-model operators exempt from GST liability under Section 9(5) while holding other, similar platforms liable on the basis that transport services were supplied "through" their apps.

The study warns that this uncertainty risks distorting competition between platforms running comparable business models.

The stakes for drivers appear significant. Nearly nine in ten drivers surveyed said they depend on subscription platforms primarily for lead generation, and 42 per cent said the model gave them greater control over earnings because they set fares directly and keep the full fare.

More than three-quarters said a 5 per cent GST burden applied to the subscription model would cut their take-home income and push them to work more hours. On the demand side, roughly two-thirds of passengers surveyed said they would cut back on ride-hailing if fares rose -- a price sensitivity the study found most pronounced among women and lower-income riders.

Researchers cautioned against a related regulatory conflation: treating mandatory safety features such as driver verification, trip tracking and emergency-response systems as evidence that a platform exercises commercial control over a ride.

"Any regulatory interpretation that conflates regulatory compliance with transactional control can create incoherence, where platforms are effectively penalised for adhering to transport safety requirements," the report said.

It recommends that Section 9(5) liability be confined explicitly to platforms that determine fares and collect payments, with safety and compliance functions carved out of the analysis entirely -- a clarification researchers say would cut compliance costs, support formalisation, and reduce the risk of drivers and riders drifting back toward informal, unregulated transport arrangements.

THE NUMBERS

The projected gains are substantial, according to the study. An individual taxi driver currently earning Rs 4.5 lakh a year in gross revenue -- before expenses -- could see that figure rise to Rs 5.86 lakh under the zero-commission structure, an increase of roughly Rs 1,36,500 annually, again before expenses.

Scaled across the economy, the shift could also expand the tax base. The study estimates additional annual GST collections of between Rs 54.5 crore and Rs 1,152 crore, depending on the pace and scale of adoption -- a wide range that reflects uncertainty over how quickly drivers and platforms migrate to the new model.

POLICY RECOMMENDATIONS

To accelerate the transition, the ONDC study calls for a rationalisation of GST on fares booked through open-network, zero-commission platforms, alongside extending Startup India benefits to qualifying operators.

It also recommends exploring cooperative ownership structures for driver collectives, public-private partnerships to expand infrastructure, and public awareness campaigns to build rider and driver trust in the newer platforms.

The authors frame the push as part of a broader alignment with the government's Viksit Bharat and Digital India agendas -- initiatives aimed at accelerating inclusive digital growth across the country.

"A more equitable, inclusive, and innovative approach to ride-hailing services in India" is necessary, the study concludes, if the sector's rapid expansion is to translate into durable gains for the millions of drivers and riders who depend on it.

With India's ride-hailing market still expanding at nearly double-digit annual rates, the debate over who captures that growth -- platforms, drivers, or the exchequer -- looks set to intensify in the years ahead.