Karnataka High Court Upholds 5% Service Charge Cap for App-Based Auto Rides

In a recent ruling, the Karnataka High Court upheld the state government’s decision to cap the service charge levied by app-based auto rickshaws at 5%, bringing relief to commuters in Bengaluru. The dismissal of petitions filed by ride-hailing companies, including Uber, Ola, and Rapido, signifies a victory for the government’s efforts to regulate service charges in the transportation sector.

The court’s decision reaffirms the Karnataka Transport Department’s notification issued in November 2022, which imposed a 5% service charge cap, along with applicable GST, on the base fare for app-based auto rickshaw bookings. Despite objections raised by the ride-hailing firms, the court clarified that aggregators are entitled to collect the specified service charge as per the upheld notification.

Transport Minister R. Ramalinga Reddy hailed the judgment as a positive development for thousands of Bengaluru residents who rely on autorickshaws for their daily commute. The ruling aims to control costs associated with booking auto rickshaws through apps, ensuring fair pricing for passengers.

The legal battle stemmed from the ride-hailing companies’ challenge to the government’s move, citing regulations permitting a higher commission and surge pricing. These firms argued that the Motor Vehicle Aggregator Guidelines allowed them to charge a commission of up to 20%, along with surge pricing of up to double the base fare. However, the court’s verdict emphasized the state government’s authority to regulate such charges in the public interest.

Previously, in January 2023, the Karnataka High Court had stayed the government notification while allowing ride-hailing companies to operate temporarily with a 10% convenience fee. However, the recent dismissal of petitions underscores the government’s determination to enforce the 5% service charge cap, aligning with its commitment to consumer welfare and fair competition in the transportation sector.

As commuters in Bengaluru continue to rely on auto rickshaws for convenient travel options, the upheld service charge cap is expected to provide transparency and affordability in app-based auto rides. The ruling serves as a reminder of the judiciary’s role in safeguarding consumer rights and promoting equitable practices in the evolving landscape of urban transportation.