Zero commission model in mobility can increase driver incomes by 30%: ONDC
In its latest white paper, Open Network for Digital Commerce highlighted the benefits of SaaS models in mobility against commission models.
Government-backed Open network for Digital Commerce highlighted 30% higher driver incomes than the current level through its zero commission model for the mobility sector, as compared to platform commissions models.
In its latest whitepaper titled, “Driving Digital Inclusion—Open Network and New Business Models in Mobility Apps”, ONDC highlighted challenges associated with associated with commission-based platforms for ride hailing apps.
“Drivers in India typically pay a percentage of their earnings - often reported as being between 25-30% - to the aggregator platform, significantly impacting their net income,” stated the report.
On the other hand, open network or zero commission SaaS models offer a monthly subscription fee or a flat platform fee that starts as low as Rs 10 per day. They would allow drivers to retain 100% of their earnings thus increasing their incomes by Rs 1.36 lakh annually. This could add up to Rs 20,475 crore annually for 15 lakh drivers across India.
Namma Yatri has a subscription plan for unlimited rides of Rs 35 per day for an auto and RS 45 per day for a cab. Meanwhile, O Rickshaw has a platform fee of Rs 10 per day and Yatri Saathi has a fee of Rs 10 per trip for up to 10 trips per day after which there is no additional fee.
The goal is to bring more people into the digital ecosystem, enabling broader participation and growth. To achieve this, two key features of the Open Network play a crucial role: interoperability and unbundling.
Interoperability allows different digital platforms to connect and share services. For example, riders on one mobility platform can book rides from vehicles onboarded by another platform. This fosters competition and inclusion, as platforms can serve different user bases without direct competition.
Unbundling allows businesses to focus on specific parts of the value chain rather than offering a full service. For example, in a mobility platform, one company may handle vehicles (supply side), while another manages customers (demand side). These specialized platforms can connect to provide a complete service thus, unbundling lowers entry barriers.
The paper also argues that to support growth of open network zero-commission SaaS ride-hailing services in India, GST should be applied based on the business model, not a blanket approach.
Online ride-hailing platforms that control the entire transaction process, including setting fares and collecting payments, are subject to GST. These platforms are considered suppliers and must pay GST on the entire ride fare.
Open network platforms do not control fares, collect payments, or offer additional services. They simply act as connectors between drivers and passengers, and the fare is not subject to GST. Several rulings from the Authority for Advanced Ruling (AAR) have confirmed this distinction but a formal recognition of this approach to GST for open network zero-commission SaaS models is needed.
According to the report, Open Network’s non commission model has the potential to to generate an annual economic impact of Rs 51,000 to Rs 67,000 crore through increased local consumption, while also boosting tax revenue for the government.
Edited by Jyoti Narayan