Karnataka notifies 1% welfare fee on gig worker payouts, caps levy per transaction across sectors

Gig worker

• Karnataka sets 1 percent welfare fee on gig worker payouts
• Fee capped per transaction by vehicle type and service sector
• Aggregators must deduct and remit fee for each gig worker payout

Did our AI summary help?

Karnataka government on February 16 issued an order mandating the collection of a welfare fee from aggregators and digital platforms under the Karnataka Platform Based Gig Workers (Social Security and Welfare) Act, 2025.

The state labour department has now fixed the welfare fee at 1 percent of payouts, subject to sector-specific caps.

The welfare fee will be calculated on the final payout to the gig worker in each transaction. For ride-hailing services, the levy has been fixed at 1 percent, capped at 50 paise per transaction for two-wheelers, 75 paise for three-wheelers and Re 1 for four-wheelers. For food and grocery delivery services undertaken by two-wheelers, the fee will be 1 percent, capped at 50 paise per transaction.

Also, read: Karnataka plans 1-2% transaction fee on aggregator platforms like Zomato, Swiggy for gig worker welfare fund

In the logistics segment, the welfare fee will be 1 percent of the payout, capped at 50 paise for two-wheelers, 75 paise for three-wheelers, Re 1 for light commercial vehicles and Rs 1.50 for heavy commercial vehicles. For e-marketplace services, the levy has been fixed at 1 percent, with a cap of 50 paise for two-wheelers, 75 paise for three-wheelers and Re 1 for light commercial vehicles. Professional activity providers will attract a 1 percent levy capped at Rs 1.50 per transaction.

The rates will come into force with immediate effect and remain applicable until further orders.

Moneycontrol was the first to report on the state government’s plan to impose a fee on October 18, 2024, in a story titled 'Karnataka plans 1-2% transaction fee on aggregator platforms like Zomato, Swiggy for gig worker welfare fund.'

Under Section 20 of the Act, a 'Platform Based Gig Workers Welfare Fee' ranging from 1 percent to 5 percent of the payout made to gig workers per transaction may be levied. The move is aimed at extending social security benefits to gig and platform workers and creating a dedicated fund to finance welfare schemes.

As per the government order, all aggregators and platforms operating in Karnataka and falling under Schedule I of the Act must deduct and remit the welfare fee on every payout made to gig workers for services rendered through digital intermediaries.

The Act defines an aggregator as a digital intermediary connecting buyers and sellers or service providers, including entities coordinating with one or more aggregators. A platform is defined as any electronic arrangement organising paid work through automated or data-driven systems. “Payout” refers to the final payment made to a gig worker for services performed, while “welfare fee” refers to the levy charged under Section 20(1) of the Act.

Also, read: Karnataka to make registration must for aggregators to hire gig workers, law in the works

Under Rule 17 of the Karnataka Platform Based Gig Workers (Social Security and Welfare) Rules, 2025, aggregators must automatically calculate the welfare fee within five working days from the end of each quarter, self-declare the amount in a standardised format and remit it at the notified rates. Settled payments such as tips, ex gratia payments, event-based or special payments, referral fees and incentives are excluded from the calculation of the welfare fee.

The Act also provides for a Payment and Welfare Fee Verification System (PWFVS), which will map all payments made to gig workers, record the welfare fee deducted for each transaction and disclose details of the fee collected and spent at the gig worker level. The system is required to comply with applicable central and state data protection laws. Until PWFVS is operationalised by the Board, aggregators and platforms are permitted to self-report and submit quarterly details of payouts made to gig workers.

Also, read: Karnataka cabinet clears gig workers welfare bill, proposes 1-5% welfare fee on Amazon, Uber, other platforms