Ola, Uber start subscription based plans for auto drivers: What changes for you? Will rides be cheaper?

Ride-hailing platforms Ola and Uber are offering subscription based plans for auto-rickshaw drivers on their platforms, This will replace charging a booking fee or commission on every transaction. Ola has rolled out the model in Delhi-NCR, Mumbai, Bengaluru and Hyderabad while Uber launched the same in six cities starting with Chennai, Kochi and Visakhapatnam, Economic Times reported citing people in the know. 

How could the move help Ola and Uber?

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The move could help Ola and Uber bypass 5% goods and services tax (GST) applicable on auto-rickshaw rides facilitated by them, the report added, but it could lead to disputes between the operators and tax authorities with lack of clarity .

What was the model so far?

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Ola and Uber followed a commission-based revenue model where the platform keeps a share of the fare for every ride and passes on the rest to driver partners. As per the model, these platforms charge a per-day or per-week fee to driver partners to get discovered by customers.

What Uber said on the new model?

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An Uber spokesperson confirmed the change as per the report and said that the service is in more than half a dozen cities as it “wants to give the optionality to its riders since many companies are already operating on this model”.

“In a highly competitive scenario, by deploying the SaaS model and not paying the 5% tax, some companies are gaining a cost arbitrage… This makes it imperative for their competitors to also deploy the same model,” a senior executive said as per the report.