Service Tax Query -Imp Sponsor

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 May 2011 One of the Company , Now company is getting Sponsor for his event, as in case of Sponsorship Service Reciepent is liable to pay Service Tax.\
But the Company is not a Service Provider, therfore not registered, now if company is required to register under Service Tax , even for such one time Liability???

U S Sharma

U S Sharma (Expert)
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29 May 2011 here the liable to service tax means .....................pay service tax to event organizor/ provider.

he will get fees from sponsor and service tax from you .

Querist : Anonymous

Querist : Anonymous (Querist)

31 May 2011 In case of Sponsorship Service, Service Reciepent is Taxable, not Service Provider??

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Great question! Sponsorship service under Service Tax has some nuances, so let's clarify:

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## **Service Tax on Sponsorship Services — Who Is Liable?**

### 1. **Basic Concept:**

* Sponsorship service means when a company (the sponsor) provides money or support in return for advertising, promotion, or association with an event, person, or organization.

* According to Service Tax law (pre-GST), **Sponsorship service is taxable**, but the **service recipient** (the entity receiving the sponsorship) is liable to pay service tax, **not the sponsor**.

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### 2. **Scenario:**

* Your company is organizing an event.
* Another company (the sponsor) pays you money as sponsorship.
* You are the **service provider** (providing the platform, event, or promotion).
* The sponsor is the **service recipient** (receiving advertising/promotion services).

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### 3. **Liability under Service Tax:**

* **The service recipient (Sponsor) is liable to pay service tax on the sponsorship amount under reverse charge mechanism (RCM).**

* Your company, as **service provider**, **does not charge service tax** on the sponsorship amount to the sponsor.

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### 4. **Regarding Registration:**

* Since your company **is providing sponsorship services** (event organization), you are considered a **service provider**.

* You **must be registered under Service Tax** if your aggregate turnover crosses the threshold limit (usually ₹10 lakh per year).

* Even if it's a **one-time event**, if your taxable turnover exceeds the threshold, you are required to register.

* If your company is **only receiving sponsorship**, you **need not register as a service provider** for this service alone but may be liable under RCM to pay service tax if applicable.

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### 5. **Summary Table:**

| Role | Liability to Pay Service Tax | Registration Requirement |
| --------------------- | --------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- |
| Event Organizer (You) | No tax charged on sponsorship received; but need to register if turnover exceeds threshold for other taxable services | Required if aggregate turnover > threshold |
| Sponsor | Pays service tax on sponsorship amount under RCM | Should be registered for paying tax under RCM |

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### **Bottom Line:**

* **Sponsor pays service tax under RCM to government.**
* Your company does not collect service tax on sponsorship amount.
* Your company must register if total taxable turnover (including other services) exceeds threshold.

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If your company is **not registered yet**, and this is your **only activity**, check your turnover; if below threshold, no need to register.
But if you have other taxable services or turnover crosses ₹10 lakh, registration is mandatory.

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Would you like me to help draft a **sample letter/email** explaining this to your sponsor or tax department?

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