Ambiguity of Cess and Its Application
The draft legislation lacks clarity on how the cess will be calculated: based on workers’ earnings per transaction or the platform's turnover.
Central government guidelines suggest a cess of 1%-2% on platform turnover, but this creates confusion when turnover and worker payments are not aligned.
Challenges in Defining Turnover vs. Worker Earnings
Zomato's 2023-24 report shows a significant difference between Gross Order Value (₹32,224 crore) and Adjusted Revenue (₹7,792 crore).
This raises questions about how the platform’s turnover is calculated and whether it accurately reflects the worker’s earnings.
Payments made to delivery workers (₹3,915 crore for Zomato) are easier to track but still unclear on the exact share per worker.
A cess based on worker earnings (e.g., ₹50 per order) is simpler to calculate, but still uncertain.
Impact of Cess on Worker Social Security
At 5%, the cess per order amounts to ₹2.50, which would generate ₹4,700 annually for a Zomato delivery worker (based on 1,880 orders/year).
This is significantly lower than the social security contributions in traditional sectors like garment manufacturing (₹18,000 per year).
The limited cess results in inadequate social security cover for workers, especially compared to other industries where employers contribute a larger share (15% of wages).
Cess Mechanism Breaks Down in Certain Scenarios
If 1% of the platform's turnover exceeds 5% of the workers' earnings (common in high turnover platforms), the cess formula becomes unworkable.
This creates a situation where neither condition can be met simultaneously.
Platforms might exploit this ambiguity to influence labor regulators and reduce their contribution to workers’ social security.
Proposed Solution
A clearer approach would be to adopt a straightforward cess rate of 5% per transaction, based on the payment to the workers, with no additional conditions or cap.
This would simplify the system and ensure a more predictable and fair contribution towards workers' social security.
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