The Karnataka High Court has directed major gig platforms, including Zomato and Swiggy, to deposit mandatory welfare contributions under state law. While the court granted interim protection against coercive action, it rejected requests to use bank guarantees instead of cash payments, as the constitutional validity of the 2025 Act remains under review.
What Happened
The Karnataka High Court has ordered major gig aggregators—including Zomato, Swiggy, Zepto, and Urban Company—to deposit welfare fees required under the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025. While Justice M. Nagaprasanna granted the companies interim protection from punitive measures, the court turned down their request to submit bank guarantees in place of the actual fee. The companies have been given three weeks to deposit the contribution amount for the second quarter of 2026.
Why The Fee Deposit Matters
The court clarified that this welfare contribution is a legal mandate rather than a voluntary payment. By rejecting the proposal for bank guarantees, the court ensured that funds intended for gig worker social security reach the state authorities directly. This decision is significant for the platforms as it necessitates cash outflows to comply with state regulations while the broader constitutional challenge to the law proceeds in court. The fee structure involves a per-delivery or per-ride levy, set at 50 paise for two-wheelers, 75 paise for three-wheelers, and Re 1 for four-wheelers.
The Legal Conflict
The core of the dispute involves a potential conflict between state and central laws. The petitioner platforms, represented by the Internet & Mobile Association of India (IAMAI), argue that the state legislation overlaps with the Central government’s Code on Social Security, 2020 (CoSS). They are invoking Article 254 of the Constitution, claiming the state law is inconsistent with central regulations. The state government, however, maintains that its welfare act is independent and necessary to provide immediate social security to thousands of gig workers across Karnataka.
Business And Financial Context
For investors, the immediate impact involves predictable, albeit incremental, compliance costs. While the individual fee per ride may appear nominal, the cumulative impact of these levies across large-scale transaction volumes can influence operating margins for food delivery and quick-commerce companies. These platforms already operate in a competitive environment where balancing delivery costs, customer acquisition, and profitability is essential. Investors are closely observing whether similar regulations might be adopted by other Indian states, which could potentially create a more complex regulatory environment for pan-India gig operations.
What To Watch Next
Key monitorables for investors include the next hearing regarding the constitutional validity of the Act and the platforms' ability to pass these costs through to either customers or partners without impacting transaction volumes. Additionally, investors will track whether the companies successfully deposit the required amounts within the three-week window and how the final court verdict impacts the long-term operational framework for gig economy players in Karnataka.