At stake is a welfare fund built from a few paise on every ride and delivery, meant for the state’s gig workers, that platforms say they should not have to pay intozo
Every time a Swiggy or Zomato rider completes a delivery, or an Uber driver finishes a ride in Karnataka, the platform is meant to set aside a few paise for a state welfare fund built for accident cover, health benefits and other support for platform gig workers. The dispute has now evolved into one of the most significant legal tests for India’s platform economy, with the Karnataka High Court set to decide whether states can create their own welfare framework for gig workers or whether that authority rests exclusively with Parliament.
Unlike salaried employees, most gig workers operate without employer-backed social security such as provident fund, insurance or severance benefits. Karnataka’s law seeks to address that gap, but digital platforms argue the state has ventured into an area already governed by the Centre’s Code on Social Security (CoSS), 2020.
As of 3 July judgement, the Karnataka High Court declined to stay the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025. However, Justice M Nagaprasanna directed the petitioning platforms to deposit the disputed second-quarter welfare contribution with the court registry within three weeks instead of paying it to the state government.
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The interim order came in a batch of petitions filed by the Internet and Mobile Association of India (IAMAI) along with aggregators including Swiggy, Zomato-owner Eternal, Zepto, Urban Company, Porter, Uber and Valmo Transportation.
The companies have challenged the constitutional validity of the Act, arguing that it substantially overlaps with protections already provided under the Centre’s Code on Social Security, 2020. The court also restrained the Karnataka government from taking coercive action against the platforms, provided they comply with the interim direction. The matter is scheduled for its next hearing on 14 August.
The dispute centres on Karnataka’s decision to operationalise a welfare fee in 2026 under a law enacted in September 2025. Although Parliament recognised gig and platform workers as a distinct category eligible for social security under the Code on Social Security in 2020, several key provisions, including welfare schemes and funding mechanisms, have yet to be implemented.
Karnataka became the first state to establish an enforceable statutory framework to bridge that gap. Besides challenging the legislation itself, the petitioners have questioned welfare fee demand notices, show-cause notices alleging non-compliance and a 21 May 2026 direction requiring platforms to establish Internal Dispute Resolution Committees (IDRCs).
What The Court Ordered
Refusing to suspend the operation of the Act, Justice Nagaprasanna held that the welfare contribution stemmed from a law duly enacted by the legislature and therefore could not be treated as a voluntary payment while its constitutional validity remained under examination.
“The amount demanded by the State is not sought as charity, benevolence, or voluntary contribution. It is demanded pursuant to a statutory mandate flowing from a duly promulgated legislation. That legislation is presently under constitutional scrutiny before this Court,” Nagaprasanna said.
The court restrained the state from taking coercive action against the aggregators provided they comply with this interim direction, and has asked the state to file its response within four weeks, with the matter posted for further hearing on 14 August.
During the hearing, Nagaprasanna also questioned the companies’ underlying business model. “For illustration, Zomato and Swiggy do not own anything except a building and an app. They don’t own the vehicles; everything belongs to somebody else. You facilitate that. Where are you making money? So you’re an aggregator. You are aggregating money?” the judge remarked.
Responding, Senior Advocate Dhyan Chinnappa drew a comparison with Amazon’s early years and said, “When Amazon started aggregation, for the first ten to fifteen years it did not make a single rupee. It lost money on every single order. That is the case with every aggregator until a certain point when they possibly can make money.”
Karnataka’s First-Of-Its-Kind Law
The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act establishes a dedicated welfare framework requiring aggregators to contribute to a social security fund for registered gig workers.
A government order issued on 13 February 2026 operationalised the contribution mechanism, fixing the welfare fee at 1 per cent of food and grocery delivery transactions, subject to a ceiling of 50 paise per order. It also prescribes contributions of up to 50 paise for every two-wheeler ride, 75 paise for every three-wheeler ride and Re 1 for every four-wheeler ride.
The contributions are deposited quarterly with the Karnataka Platform-Based Gig Workers Welfare Board, constituted through a notification issued on 27 January 2026.
Beyond financing welfare, the legislation requires eligible platform workers to register with the Welfare Board, creates grievance redressal mechanisms, mandates prior notice before worker deactivation in specified circumstances and requires platforms to provide greater transparency regarding contracts and algorithmic systems that influence work allocation, incentives and earnings.
The law does not alter the employment status of gig workers or classify them as employees. According to state government data, implementation is already under way, with 11 platforms onboarded and more than 1.2 million workers registered with the Welfare Board.
Two Laws, One Fund
The central issue before the High Court is whether Karnataka’s legislation conflicts with Parliament’s Code on Social Security, 2020. Social security falls under the Concurrent List of the Constitution, enabling both Parliament and state legislatures to legislate on the subject. However, Article 254 provides that where a state law is inconsistent with a parliamentary law on the same subject, the central legislation prevails to the extent of the inconsistency.
The platforms argue Karnataka has created a parallel social security regime despite Parliament already legislating on the subject. They rely particularly on Section 114(4) of the Code on Social Security, which requires aggregators to contribute to a national Social Security Fund for gig and platform workers
The Union government has backed this position. Appearing for the Centre, Additional Solicitor General Arvind Kamath argued that a provision-by-provision comparison would show substantial overlap, if not outright replication, between the Code and Karnataka’s Act, and that the state law “cannot be permitted to operate in the teeth of Article 254 of the Constitution of India.”
Worker unions dispute the repugnancy argument directly. “The companies are misrepresenting the intent and content of the law. The Karnataka law only supplements and does not replace the CoSS,” said Shaik Salauddin, Co-Founder and National General Secretary, Indian Federation of App-Based Transport Workers (IFAT), who is also Founder President of the Telangana Gig and Platform Workers Union (TGPWU).
Salauddin also pointed to Convention No. 193 of the International Labour Organization (ILO), adopted by the International Labour Conference on 12 June 2026, arguing that evolving global standards increasingly favour stronger protections for platform workers, including social security, fair remuneration, occupational safety, collective representation and safeguards against algorithmic exploitation.
Why Platform Are Challenging The Law
Senior Advocates CK Nandakumar and Chinnappa, appearing for the petitioners, argued that Karnataka’s legislation creates a parallel compliance framework in an area already occupied by Parliament through the Code on Social Security, 2020. They argue that aggregators operating across multiple states would face overlapping regulatory obligations and additional financial liabilities if individual states enact separate welfare regimes.
Beyond the welfare contribution, the companies have challenged Section 13 of the Act, which requires platforms to disclose information relating to automated monitoring systems and algorithmic processes governing work allocation, pricing, incentives and earnings. According to the petitioners, such disclosures involve commercially sensitive and proprietary information, and mandatory disclosure would compromise trade secrets.
During hearing, Justice Nagaprasanna asked why the companies were objecting to a contribution of “fifty paise” per ride.
Responding, Senior Advocate Dhyan Chinnappa said the issue was not the amount but its cumulative financial impact, submitting that aggregation businesses often run at a loss for several years before turning profitable. The companies have also submitted that they already provide several welfare measures voluntarily, including health insurance, accident insurance and maternity support for eligible workers.
State Govt, Unions Defend The Act
Appearing for the state, Advocate General Shashikiran Shetty argued that the Act supplements rather than replaces the central framework, and provides additional welfare protections for gig workers. The state told the court that platform companies had participated extensively in consultations before the law was enacted, and “cannot feign surprise” at its provisions.
The Karnataka Labour Department published the draft Bill in June 2024 and invited stakeholder comments, to which both IAMAI and the National Association of Software and Service Companies (NASSCOM) responded.
“Having participated in such consultations, the petitioners cannot now turn around and challenge the legislation on grounds of repugnancy,” the state argued. Karnataka further submitted that Rajasthan, Bihar and Telangana have enacted similar welfare laws for gig workers, and that platforms are complying with those frameworks without dispute.
Worker unions have echoed the state’s defence and gone further, framing the challenge as an attack on workers’ rights. “The legal challenge mounted by platform companies against the Karnataka Gig Workers Welfare Act is an unfortunate attempt to deny millions of gig and platform workers their basic rights to social security, welfare, and dignified working conditions. The digital economy cannot be built on exploitation and insecurity,” Salauddin said, calling on aggregators to withdraw their petitions and engage in dialogue with worker organisations and the government instead.
Karnataka App-Based Workers Union (KAWU) has gone a step further, filing an intervention application seeking to become a formal party to the case in order to defend the law in court, according to a report by The Workers Rights.
What Happens On 14 August
According to media reports, the Karnataka High Court’s eventual ruling is expected to become a landmark precedent for India’s platform economy. Beyond deciding the validity of Karnataka’s law, the judgment is likely to clarify whether states can enact additional welfare protections for gig workers alongside Parliament’s Code on Social Security, or whether a single national framework should govern the sector.
On the domestic side, Niti Aayog’s 2022 report, ‘India’s Booming Gig and Platform Economy’, had projected India’s gig workforce would grow from 7.7 million workers in 2020-21 to 23.5 million by 2029-30, underlining the stakes for however this jurisdictional question is resolved.
The decision is therefore expected to shape not only gig worker welfare but also the constitutional balance between the Centre and states in regulating one of India’s fastest-growing workforces. The case is next listed for hearing on 14 August 2026.
