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Service Tax on Sponsership Fees

CA Ravindra (Chartered Accountant) (93 Points)

23 May 2011

What would be the taxability of Service Tax if Co. has taken the Sponsership of IPL Cricket?

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6 Replies

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 23 May 2011

This service is liable under reverse chagre. The company would have to pay the ST. If the same is used for provding the taxable services then it would be allowed as credit.

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sanjay k bulakh (proprietor) (39 Points)
Replied 23 May 2011

IN CASE SERVICE RECEIVER IS A CORPORATE OR FIRM , THEY HAVE TO GET REGISTRATION AND PAY TAX FOR THE SPONSERSHIP SERVICES RECD BY THEM. IF SERVICES ARE RECD BY OTHER THAN CORPORATES OR FIRMS, THEN THE SERVICE PROVIDER HAS TO PAY THE SERVICE TAX..

IF SERVICE RECEIPIENT IS LOCATED OUTSIDE INDIA, SERVICE PROVIDER IS LIABLE TO PAY SERVICE TAX

Harpreet (* * * * * *) (1670 Points)
Replied 23 May 2011

The only category under which the services as described by you could have been taxed is "Sponsership Service".Since in your case the sponsorship is received in relation to sponsorship of a sportsevent viz., a cricket tournament, would be out of the purview of servie tax as taxable service under this service does not cover sponserhsip of any sports event. The person receiveing the sponsership is liable to pay serviec tax under sponsership service

Harpreet (* * * * * *) (1670 Points)
Replied 23 May 2011

Below is the article which i have copied from article section of CACLUB, please go through with the same:

Introduction: Service Tax is started with three Services, but now slowly it covers all the limbs of services. In Every Budget one new service will be introduced. With effect from 1^st May 2006, Sponsorship Service is introduced to cover the promotion of products or services, shows or award functions.

Definition: Sponsorship Service means which is provided or to be provided to anybody corporate or firm by any person receiving sponsorship, in relation to such sponsorship, in any manner, but does not include services in relation to sponsorship of Sports events.

With effect from 1-7-2010, Section 65(105)(zzzn) defining sponsorship service is drastically amended in the Finance Act, 2010 that taxable service means any service provided or to be provided to any person, by any other person receiving sponsorship, in relation to such sponsorship service, in any manner.

Analysis of Changes:

S.No	Position before 1-7-2010	Position After 1-7-2010
1	Service provided to only body corporate or firm is covered	Service provided to any other person is covered
2	Sponsorship relating to spots events not taxable	Sports events are taxable with some exemptions to specified tournaments or champion ships.

What is sponsorship Service?

As per Section 65(99a) Sponsorship service includes the following viz..

1. Naming the event after the sponsor

2. Displaying the sponsor’s company logo or trading name

3. Giving the sponsor exclusive or priority booking rights

4. Sponsoring prizes or Trophies for competition

It specifically excludes any financial or other support in the form of donation or gift wherein service provider is under no obligation to provide anything in return to such donors.

Valuation:

The value of service is the gross amount charged for such service including any cost or expenditure incurred in connection with providing of the services.

Who needs to pay Service Tax?

According to Rule 2(1)(d) of the Service Tax Rules, the body corporate or firm which receives the service is liable to pay service tax, if any person other than this, then liability to pay service tax is on the Service Provider.

When to Pay Service Tax?

Status

Basis

Due Date for normal payment

Due Date for e-payment

Non-corporate entities like individual, proprietary ship, partnership firm

Quarterly payment

(Apr-Jun, Jul-sep,

Oct-Dec, Jan-Mar)

5^th of the month succeeding the relevant quarter in which the consideration was realized.

6^th of the month succeeding the relevant quarter in which the consideration was realized.

Corporate entities

Monthly payment

5^th of the next month in which the consideration was realized.

6^th of the next month in which the consideration was realized.

For the month of March due date for payment of service tax is 31^st March.

Rate of Service Tax:

The rates of service tax will change time to time. The rate of service tax will summarized below.

Period	Service Tax	Education Cess	SHE .Cess	Total Rate
16.08.2002 to 31.05.2003	5%	-	-	5%
14.05.2003 to 09.09.2004	8%	-	-	8%
10.09.2004 to 18.04.2006	10%	2%	-	10.2%
19.04.2006 to 10.05.2007	12%	2%	-	12.24%
11.05.2007 to 23.02.2009	12%	2%	1%	12.36%
24.02.2009 to till date	10%	2%	1%	10.3%

How to pay Service tax?

Payment of service tax must be through GAR-7 challan and through designated branches.GAR-7 Challan and list of designated branches will be available in the CBEC web site. www.cbec.gov.in or www.aces.gov.in.

Benefit of Cenvat Credit:

Cenvat credit is a concept introduced to overcome cascading effect of indirect taxes. Because of the cascading effect assessee is paying tax more than one time for the same goods and services. Cenvat Credit is nothing but adjusting the tax already paid which included in the current tax.

The service provider providing taxable services is entitled to avail CENVAT credit of the service tax paid on

1. Inputs

2. Capital goods and

3. Input services

Those must be used for providing taxable services.

RECENT AMENDMENT:

Specific Exemptions: Notification 30/2010-ST dated 22-06-2010 provides exemption for sponsoring the under mentioned;

1. Tournaments or championships organised by any of the National Federations or Federations affiliated to such National Sports Federations, where the participating teams or individuals represent any District, State or Zone.

2. Organised by Association of Indian Universities-Inter-University Sports Board, School Games Federation of India, All India Council for Deaf, Paralympic Committee of India(for physically challenged), Special Olympics Bharat(for mentally challenged)

3. Organised by the Central Civil Services Cultural and Sports Board.

4. Organised as a part of National Games, by the Indian Olympic Association.

5. Organised under Panchayat Yuva kreeda Aur Khel Abhiyan Scheme.