Indian state’s new tax on digital platforms sets gig workers against firms | Business and Economy News

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Gig workers have welcomed a new law in India’s largest state Rajasthan to impose a tax on revenue earned by digital platforms that operate in the state, including global giants Uber and Amazon, even as industry groups have warned it will eventually hurt customers and derail business in the state.

Late at night on Monday, Rajasthan passed a law imposing up to two percent tax on revenue earned by digital platforms that operate in the state. The tax would go towards the welfare and social security of an estimated two million platform-based gig workers in the state, a first in the country and coming at a time when national elections are less than a year away.

The move, orchestrated by the Indian National Congress which is in power in the state, has been welcomed by associations representing gig workers, who have over the past few years frequently organised to demand improved wages and social security benefits. The new rules are expected to kick in within the next two to three months.

Shaik Salauddin, founder and state president of the Telangana Gig and Platform Workers Union (TGPWU) and national general secretary of the Indian Federation of App-Based Transport Workers (IFAT), said gig workers “celebrate” the move and spearheaded the consultations with the government of Rajasthan on the bill’s provisions.

“We here at IFAT celebrate this day along with all our brothers and sisters who walked and contributed to this complex and difficult journey where a multibillion-dollar corporation has refused to recognise us, speak to us, and ignored our presence in the labour market,” Salauddin said in a statement.

‘Excellent’ move

India has an estimated 7.7 million platform-based gig workers, and according to state-run think-tank NITI Aayog, the number is expected to rise to 23 million by 2030. But the majority of gig workers don’t have social security benefits because they are employed in the country’s informal or unorganised sector.

The Rajasthan Platform Based Gig Workers (Registration and Welfare) Act 2023 establishes a welfare fund for gig workers which will be funded through this new tax that will be applied to each transaction on the platform. The tax shall not be more than two percent or less than one percent, as per the act, and will be applied to company’s revenue on that transaction and not to the customers.

The fund will be used towards financing schemes meant for the welfare of platform-based gig workers.

Gig Amazon Warehouse workers along with others shout slogans during a protest in New Delhi, India
Over the past few years gig workers have frequently organised to demand improved wages and social security benefits [File: Manish Swarup/AP Photo]

Under the act, a government-run database of all gig workers will keep track of their employment status and time of engagement with one or more aggregators. In addition, there will be a centralised tracking and management system to manage all financial transactions taking place on the aggregator’s platform.

Financial transactions of app aggregators will be mapped through this tracking system using application programming interfaces (APIs) shared by the companies. These will be shared in real time, explained Nikhil Dey, member of the Suchna Evum Rozgar Adhikaar Abhiyan that spearheaded the drafting of the bill.

The act also establishes a welfare board where the representatives of gig workers’ unions will be part of all decision-making on how the money is to be spent, for the first time in the country. Together with representatives of companies, the state and gig workers unions, the board will draw up welfare schemes and benefits.

Janaki Srinivasan of the Fairwork project was one of the observers of the deliberations on the law that took place in Rajasthan’s capital Jaipur earlier this month and called the new law an “excellent” move. Fairwork is a gig economy research project at the Oxford Internet Institute that evaluates the working conditions of gig workers on digital platforms.

Comparing Rajasthan’s legislation with other global measures to regulate the platforms industry, she told The Reporters’ Collective that “groups all over the world are seeking multiple entry points to reform the app-based jobs sector but the combinations used to draft [these rules] are fairly unique”.

The registration system under the Rajasthan act will be the first step towards having a clear and fair picture of the exact number of gig workers employed in the sector as it automatically registers all such workers, said Balaji Parthasarathy, principal investigator for the Fairwork project.

‘Counterproductive’

IndiaTech, an industry association representing Indian startups, investors and app aggregators, said that the Rajasthan act will lead to duplication of some of the efforts already being undertaken by app aggregators.

“The food delivery platforms already provide accident and health insurance free of charge to gig workers. For instance, accident insurance coverage by food ordering and delivery platforms such as Zomato and Swiggy may already be up to one million rupees ($12,195) and the premium expense is borne by these platforms themselves,” Rameesh Kailasam of IndiaTech told The Reporters’ Collective. (Dey, who was one of the drafters of the bill, said the welfare board in the state will ensure there is no duplication of schemes.)

Kailasam added that the tax on each transaction could put a burden on consumers eventually.

“A two percent levy on consumers is an added cost that will make this economy even more pricier and may lead to fall in demand and orders, which may become counterproductive for gig workers’ welfare,” he said.

Questions sent by The Reporters’ Collective to Uber India and the Indian food delivery platforms Zomato and Swiggy remained unanswered – as did questions sent to India’s Ministry of Labour and Employment.

Political manoeuvrings

Congress party leader Rahul Gandhi, with other leaders during his months long Bharat Jodo Yatra in Hyderabad, India
A gig workers’ representative met with Congress Party leader Rahul Gandhi, centre, during his long march across India last year to raise the issue of the workers’ rights with the politician [Mahesh Kumar A/AP Photo]

Telangana-based Salauddin, who spearheaded the consultations with the government of Rajasthan on the bill’s provisions, told Al Jazeera, “If any government must learn how to care for the poor, they must learn from the Rajasthan government under Ashok Gehlot. The chief minister was with us discussing the provisions of this bill from 9:30am in the morning till 11:30pm. I think this is commendable.”

Aggregator firms that had so far resisted engaging with them “will now have no other option but to notice us and speak with us”, Salauddin added.

For the Congress Party, which currently holds a full majority in only four out of 28 Indian states, including in Rajasthan, the passage of this act is a political message to the workers’ groups ahead of the national polls in 2024.

Earlier this year, Salauddin walked alongside Rahul Gandhi, the leader of the Congress Party, for a stretch of the politician’s “Bharat Jodo Yatra” (Unite India March) – a 135-day-long foot march across the country to rejuvenate his party and engage with the people before the national polls.

Salauddin told The Reporters’ Collective, “I presented the issues of India’s gig workers to Rahul Gandhi during the yatra, and he has fulfilled his promises made to us.”

On July 8,  the government of Congress Party-ruled Karnataka state announced that it will provide free accidental and life insurance cover of 400,000 rupees ($4,878) to gig workers. The state government will pay the annual premium.

Labour experts told The Reporters’ Collective that there are high chances that Karnataka too, could bring in an act similar to what Rajasthan has passed.

“We never know, other Congress-ruled states in India may introduce such provisions, too. Gig workers are now a big vote bank. We can’t be ignored,” Salauddin said.

State law vs federal laws

In India, labour is a state subject, meaning every state has the right to draft its own set of laws but in the process those cannot contradict or override any federal laws.

In 2020, the Code on Social Security – a federal code consolidating all labour laws in India – added a section on the gig economy, putting obligations on platform companies to create a social security fund with contributions between one and two percent of their annual revenue. However, this has yet to kick in.

The new Rajasthan law has no provisions that contradict the Code on Social Security, and can be a separate legislation under the Indian Constitution’s concurrent list.

“The social security code has provisions to levy cess on the annual turnover of the company, but we have proposed a levy on every transaction. So we clearly don’t override the central law,” said Dey.

The new act is inspired by a 1969 Indian law called the Maharashtra Mathadi, Hamal And other Manual Workers (Regulation Of Employment And Welfare) Act, popularly known as the Mathadi and Hamal Workers Act, and is a continuation of India’s labour history, says Srinivasan of Fairwork.

Once an unprotected and exploited casual labour, the Mathadi (head loaders) and Hamal (manual workers) in the state of Maharashtra organised under “Mathadi Tipatriate Boards”.

On the back of the 1969 law, millions of manual workers performing jobs like loading, unloading, stacking, carrying, weighing and measuring were provided better terms and conditions of employment. They earned the right to provident funds, gratuity, and other medical benefits.

Rakshita Swamy, one of the bill’s drafting members, says that the success of the Mathadi and Hamal Act showed the way towards having dignified working rights many decades ago. The Rajasthan gig workers’ act is going to have pertinent long-term impacts, she said.

Pawanjot Kaur is an associate member of The Reporters’ Collective.

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