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Service tax on sponsorship

Sunil G (Manager-Commercial) (29 Points)

05 February 2013

A State Public Sector Company availed a sponsorship amount of Rs.10 lakhs from bankers for the launching of a new product. In return Company exhibited logos of bank in TV ads, hoardings, website, stationaries etc.

My query is who is to pay ST under reverse tax mechanism?

Thanks for your expert opinion in advance.

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5 Replies

AMEER SHA (Learner) (203 Points)
Replied 05 February 2013

Hi,

As per the notification no:30/2012 ST , Service receipient will have to pay the 100 % of service tax on the Sponsorship service. Here in this case State Public Sector company will have to pay the service tax of 12.36 % on Rs 10 lacs.

CA Saravanakumar (Practice) (59 Points)
Replied 08 February 2013

Dear Mr. Sunil,

If my understanding of the fact given is correct, bank is required to pay the service tax on sponsorship on reverse charge basis.

The public sector company is launching a new product which it advertises in TV, hoardings etc., The company has received Rs. 10 lakhs from the bank and displays the bank's logo in the TV, hoardings etc., Hence service receiver is BANK and service provider is Public sector company. This is because bank is receiving indirect service of advertisement and the company procides the service by displaying the logo of the bank in the ad.

Thanks,

Saravanakumar G

Manoj Agarwal (Service Tax Consultant Rourkela Service) (3456 Points)
Replied 10 February 2013

Sec 65B(2) "advertisement" means any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person;

But "sponsorship" not defined in the new section 65B.

In Sec 65(99a) “sponsorship” includes naming an event after the sponsor, displaying the sponsor’s company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition; but does not include any financial or other support in the form

of donations or gifts, given by the donors subject to the condition that the service provider is under no obligation to provide anything in return to such donors;]

In case of sponsership, if the receiver is a body corporate or a partnership firm, located in the taxable territory, the liable to pay tax is on the service receiver due to reverse charge under not. 30/2012.

so, the bank must pay full tax @ 12.36% on Rs. 10 Lacs.

Fully agree with views of Mr. Saravankumar.

Ravi Kiran (student) (32 Points)
Replied 03 December 2014

hi,

A Trade union received a sponsorship amt. of Rs.100,000 from an company for an event, in return it allowed the company to exhibit its products on that event. please help with the service tax leviability in this situation.

Prem Shankar Singh (Assistent Manager - Accounts and Finance) (22 Points)
Replied 13 July 2015

The Company will be liable to pay service tax (100%) under Revese charge Machanisam. if receipent is Not Partnership firm or Body Corporate in that case the provider will be liable.