Swiggy, Zepto, Urban Company Challenge Karnataka's 1% Gig Worker Tax

Six of India's largest consumer internet unicorns just told the Karnataka High Court that the state's gig worker law is unconstitutional — and they've got a pretty strong argument about duplicate regulation.

IAMAI, representing Swiggy, Zepto, Urban Company, Eternal, and Meesho's logistics arm Valmo, filed a writ petition challenging the Karnataka Platform Based Gig Workers (Social Security and Welfare) Act, 2025. The petition claims the law creates a parallel regulatory framework to the Centre's Code on Social Security, 2020 (COSS), which already establishes a national scheme for gig worker identification, welfare, and aggregator contributions. The matter hasn't even been listed yet, but the stakes are already clear.

The Welfare Fee That's Triggering the Fight

Heart of the dispute: a 1% welfare fee per transaction on platform aggregators, capped per ride or delivery. Food and grocery platforms pay up to ₹0.50 per order. Ride-hailing services like Uber and Rapido pay ₹0.50 for two-wheelers, ₹0.75 for three-wheelers, and ₹1 for four-wheelers. Urban Company faces the highest cap at ₹1.50 per transaction. Logistics platforms like Porter get a sliding scale from ₹0.50 to ₹1.50 depending on vehicle.

First collection date is July 5 for transactions from April to June 2026. Late payments carry 12% annual interest, and repeated violations can hit ₹1 lakh penalties. Platforms must file quarterly returns through a new Payment and Welfare Fee Verification System (PWFVS).

Two-Tier Grievance: IDRCs and Welfare Board

Beyond the fee, the law mandates every platform to set up an Internal Dispute Resolution Committee (IDRC) to handle payout disputes, suspensions, and deactivations. Workers get 14 days for a response; if dissatisfied, they escalate to the Welfare Board. Written reasons are required before account termination — except in emergencies. The Karnataka government says roughly 12 lakh active gig workers have already been submitted by 12 aggregators, though officials admit data may include duplicates until unique IDs are issued.

Why This Matters for Platform Economics

This is not just a legal wrangle. If Karnataka's law holds, it sets a precedent for other states to layer their own social security taxes on top of the Centre's framework. For platforms operating on thin margins, a per-transaction fee — even at ₹0.50 — adds up fast across millions of orders. The challenge now forces the courts to decide whether the Constitution allows states to independently tax gig work or whether that power belongs solely to Parliament. The answer will shape how every Indian state regulates platform labor going forward.

Source: Eternal, Meesho, Other Consumer Tech Unicorns Challenge Karnataka's Gig Worker Law
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