SINGAPORE - Ride-hailing giant Grab will pass on the impending increase in goods and services tax (GST) to its private-hire drivers by increasing its commission by 0.18 percentage point on Jan 1, 2023 – a move that has drawn ire from some quarters and runs counter to what rivals Gojek, Tada and Ryde plan to do.
The Nasdaq-listed company currently takes a 20 per cent commission from private-hire drivers on its platform here, and in a message that was sent to drivers on Dec 19, it said it will take a 20.18 per cent commission when GST is raised to 8 per cent, up from 7 per cent now.
The additional commission – which amounts to about three cents for a ride with a fare of $16 – will fully go to the Inland Revenue Authority of Singapore, Grab added.
Meanwhile, the commission Grab takes from cabbies who use its JustGrab ride-hailing service will also be raised from 3 per cent to 3.02 per cent for fares below $11, and from 12 per cent to 12.1 per cent for fares $11 and above, due to the upcoming GST hike.
In a list of frequently asked questions published later on its website, Grab said GST is applied on its commission as drivers are considered the company’s customers.
“The way Grab operates is that our driver-partners pay us for the ride-matching service that we provide... This is why GST is applied on the commission that driver-partners pay Grab,” added the firm.
The current GST of 7 per cent is already included in the 20 per cent commission that Grab now takes, and this will continue to be the case. It said it does not plan on passing on the GST increase to passengers, citing concerns from consumers over high fares.
It argued that passing the GST increase on to passengers may result in fewer bookings for drivers.
To cushion the blow, Grab said it will introduce a six-month GST rebate scheme for drivers to cover the cost of the GST increase from Jan 1 to June 30, 2023. However, this will apply only to those who complete at least 200 rides on Grab’s platform each month.
Grab’s announcement on Dec 19 was met with unhappiness among some drivers who questioned why they are the ones bearing the brunt of the tax hike, why the company cannot absorb the increase, and why passengers do not have to pay more.
Full-time private-hire driver Jude Ng, 45, said: “It is unfair. We are not the consumers, we are just trying to earn a living.”
Another driver, Mr Cedric Lim, 32, said: “Grab is going to make drivers absorb the GST increase by claiming they are providing us drivers a service. We are not buying their services, as we are contractors serving their customers.”
Mr Roy Lee, 42, who has been driving with Grab since 2016, was more understanding, telling The Straits Times that he expects the impact of the increased commission on his earnings to be minimal.
“I know a lot of drivers are complaining, but a lot of it stems from their misunderstanding,” said Mr Lee, adding that he has given feedback to Grab about how their communications could have been handled better.
Asked to explain how GST is applied in the ride-hailing sector, Mr Kor Bing Keong, GST leader at accounting firm PwC Singapore, said the fares collected by private-hire drivers are not subject to GST because the drivers themselves are not GST-registered.
Conversely, the commission charged by platform operators includes GST because these companies are GST-registered businesses.
He added: “The law does not dictate who bears the GST amount, or the GST hike. It is really a commercial decision for the platform operator to make, whether they want to fully pass on the GST, fully absorb it, or partially pass it on.”
Earlier in December, the National Taxi Association and National Private Hire Vehicles Association had issued a statement on Facebook calling on platform and taxi operators to help drivers cope with the impending GST hikes in 2023 and 2024.
The associations said private-hire drivers and taxi drivers are not GST-registered and cannot put in claims for GST, but they are also not in the position to adjust fares. Hence, the GST increases should not be wholly absorbed by them.
Gojek said in response to queries from ST that it will continue to absorb GST as part of the service fee it charges its drivers.
This came after the company announced on Dec 19 plans to raise its service fee from 10 per cent to 15 per cent from Feb 1, 2023.
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Gojek previously took a 20 per cent service fee from its drivers, but this was halved to 10 per cent in June 2021 to help boost driver earnings during the Covid-19 pandemic.
For ride-hailing app Tada, which does not charge a commission, GST is levied on its platform and cancellation fees. The firm said on Dec 21 that it will temporarily absorb the GST increase on these fees for six months.
“As with all our policies, we will monitor and review it as the landscape evolves,” added Tada.
Mr Terence Zou, founder and chief executive of ride-hailing firm Ryde, said his company plans to maintain the 10 per cent commission it currently charges its drivers, and the 30 cent platform fee that it charges passengers.
Ms Tammy Tan, group chief branding and communications officer for ComfortDelGro, also said its commission fees for private-hire car drivers under its ComfortRide service remain unchanged.
Meanwhile, the company, which controls 60 per cent of the total taxi fleet in Singapore, will extend its daily rental waiver of 15 per cent for its cabbies until March 31, 2023, to help them cope with the rising costs of living, Ms Tan added.
This article was first published in The Straits Times. Permission required for reproduction.