This entry was inserted to rationalise tax compliance in the bus aggregation sector and to differentiate between organised and unorganised players.
Organised players (i.e., companies) typically have GST registrations and systems in place for compliance.
Unorganised operators (e.g., individuals, partnership firms, or unregistered entities) were often escaping the tax net when services were routed through aggregators.
Hence, under Entry 1A :-
If the actual bus operator is not a company, the ECO is deemed to be the supplier and must pay GST under RCM.
If the bus operator is a company, the ECO is not liable, and the company pays GST under forward charge.
As per explanation (d) of the notification, the term "Company" has the same meaning as assigned to it in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013)
Booking via redBus - Non-Company Operator :-
A passenger books an intercity bus ride through red Bus. The bus is operated by M/s Ramesh Bus Services, a registered proprietorship.
Since the supplier is not a company, redBus (ECO) shall pay GST under Section 9(5).
Booking via redBus - Company Operator :-
The bus is operated by M/s ABC Transport Pvt. Ltd. (a registered company).
Since the supplier is a company, Entry 1A does not apply. The bus company pays GST under the forward charge mechanism.
It is important to distinguish between :-
Entry No. 1, which excludes omnibus from ECO liability (amended via Notification No. 16/2023), and
Entry No. 1A, which includes omnibus rides, but only when the operator is not a company.
Radio-taxi, cab, bike, etc. (non-omnibus)
As long as supplied via ECO
Yes, only if supplier is not a company
If supplier is a firm, HUF, etc.
Autorickshaw rides booked through ECOs are subject to GST, with the ECO liable to pay the tax under Section 9(5) of the CGST Act.
Autorickshaw rides hired directly (not through an ECO) continue to be exempt from GST. This provision created a debate whether such discriminating GST treatment between autorickshaw hired directly and booked through ECO is violative of Article 14 of the Constitution ?
This distinction was upheld by the where the Court ruled that the differential tax treatment does not violate constitutional provisions. The petitioner here argued that the distinct treatment is violative of Article 14 being discriminating. However, honourable high court ruled that in taxation law reasonable classification is permissible and such classification cannot be called discrimination.