The government-backed Open Network for Digital Commerce highlighted 30% higher driver income than current levels through a zero commission model for the mobility sector compared to platform commission models.
In its latest white paper titled “Driving Digital Inclusion—Open Networks and New Business Models in Mobility Apps”, ONDC has highlighted the challenges associated with commission-based platforms for ride-hailing apps.
“Drivers in India typically pay a percentage of their earnings – often reported as between 25-30% – to the aggregator platform, significantly impacting their net earnings,” the report said.
On the other hand, open network or zero commission SaaS models offer monthly subscription fees or flat platform fees that start as low as Rs 10 per day. They will allow drivers to retain 100% of their earnings thereby increasing their income 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 at Rs 35 per day for autos and Rs 45 per day for cabs. Meanwhile, there will be no additional charges after O-Rickshaw platform charges are fixed at Rs 10 per day and Yatri Saathi Rs 10 for up to 10 journeys per day.
The goal is to bring more people into the digital ecosystem, enabling broader participation and growth. To achieve this, two key features of open networks play an important 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 from another platform. This promotes 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 complete service. For example, in a mobility platform, one company might 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 the growth of open network zero-commission SaaS ride-hailing services in India, GST should be implemented based on a 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 vehicle rental.
Open network platforms do not control fares, collect payments, or offer additional services. They only act as connectors between drivers and passengers, and fares are not subject to GST. Several regulations of the Authority for Advanced Rules (AAR) have confirmed this distinction but formal recognition of this approach is required in GST for open network zero-commission SaaS models.
According to the report, Open Network’s non-commission model has the potential to generate an annual economic impact of Rs 51,000 to 67,000 crore by increasing local consumption, while also increasing tax revenue for the government.