While a lot is being discussed about the proposals with regards to the welfare of gig workers, what becomes imperative is to implement them, say experts
The Karnataka government announced on October 19 that they will impose a new cess on transactions that will be conducted through aggregator platforms including Ola, Uber, Swiggy, Zomato, and others. Cess is a type of tax that is imposed on top of a taxpayer's base tax obligation. It is typically enforced in addition when the state or federal government seeks to raise money for particular objectives.
The cess that will be collected will be used by the state for the welfare fund for gig workers. In a press conference, Karnataka Labour Minister Santosh Lad said that the money would be charged on transportation. It won’t be charged on products or goods that consumers purchase.
This comes at a time when the state government has already drafted the gig workers bill. The intent of the Karnataka Platform-Based Gig Workers [1] (Social Security and Welfare) Bill, 2024, is to provide social security and welfare measures to gig workers. The draft bill has faced its own share of criticisms as well. While workers unions have said that it doesn’t have enough safeguards, industry body Nasscom has said that the bill has serious gaps.
The decision to impose cess by the Karnataka government is coming at a time when there are wider discussions about the welfare of gig workers. The gig economy in India doesn’t have any specific laws to deal with it. To address the social security concerns of the workers, the government is planning to clearly define their relationship with platforms to address social security issues, a source from the Ministry of Labour and Employment told Outlook Business earlier. On October 17, officials from several platform workers' associations met with the labor ministry to discuss potential ways to offer gig workers social security protection.
Coming back to the implementation of cess, experts believe that it is a welcome move. The passing of the economic benefit of the cess onto the gig workers can have a significant impact, add experts. They say that this move could advance the broader discourse on securing meaningful protections for gig workers.
“It may however increase the compliance burden on aggregators and e-commerce operators as they will have to obtain registration and file quarterly returns,” says Darshan Bora, Partner, Economic Laws Practice.
So now the question that arises is: how will this impact the take-home income of gig workers? Experts believe that the move would not have a direct impact on the take-home salary of gig workers. “This move is unlikely to directly impact the take-home income of gig workers, as the cess collected is intended to be allocated to a welfare fund established for the overall benefit of gig workers, pursuant to the provisions of the Karnataka Platform Based Gig Workers (Social Security and Welfare) Bill, 2024 (“Karnataka Bill”), which is yet to be formally adopted,” says Adil Ladha, Partner at Saraf and Partners.
Ladha further highlights that the Karnataka Bill states the fund shall be utilised and managed in a manner as prescribed. The specifics of this will become clear once the rules under the bill are issued.
The burden of this cess will be equally shared between the customer and the aggregator, with each bearing 50 per cent of the cost. However, experts are concerned that the authorities might not have the necessary technology to accurately calculate and allocate costs associated with a particular process or system. This, in turn, could necessitate reliance on data provided by the aggregators themselves.
Karnataka isn’t the only state that is focusing on the welfare of gig workers. Telangana is also preparing the Gig and Platform Workers (Rights and Welfare) Bill, 2024, as per a Moneycontrol report. Rajasthan is also the first state to implement a bill for the welfare of gig workers.
The bill was passed in July 2023. The bill also highlighted that a small fee would be deducted from each transaction on the aggregator platforms to support gig workers. It was also mentioned that if a platform didn’t follow it, they would be fined Rs 5 lakh for the first offense and Rs 50 lakh for further offenses.
While a lot is being discussed about the proposals with regards to the welfare of gig workers, what becomes imperative is to implement them, say experts.
“While proposals and policies may capture public attention, tangible progress will only be realised when these measures are effectively implemented to genuinely benefit gig workers. The focus must now shift from legislation to action,” says Ladha.
Additionally, Nikhil Dey, founder of the Mazdoor Kisan Shakti Sangh, said at a press conference in New Delhi, “It has been a year since the Act [Rajasthan Platform-Based Gig Workers] was passed, but the government has failed to implement it.” As per the Times of India, Dey further said that the delay in implementing these laws continues to leave several gig workers without the social security measures that they have been promised.
Meanwhile, with regards to the consumer point of view, Sandeep Agrawal Director and Founder of Teamlease Regtech highlights that consumers may face higher service costs if companies pass on the cess to offset added expenses, potentially impacting demand, especially among price-sensitive customers.
"Aggregator platforms like food delivery and ride-sharing services operate on thin margins and the introduction of the cess could push companies to raise prices. However, clear communication on fund use and visible improvements in gig workers' conditions could help justify the price increase," adds Agrawal.
India had approximately 7.7 million gig and platform workers in 2020-21, as per Niti Ayog. This number is projected to increase to 23.5 million by 2029-30. With the increasing demand of quick commerce and e-commerce platforms, it is expected that demand for gig workers will also increase. For example, during the festive season, the demand for gig workers will reportedly rise 40 per cent. Amid the increase, it becomes imperative to have wider safety needs for gig workers.