Introduction: In this article we will be discussing the chargeability mechanism (RCM/FCM) and the person liable for payment of GST on sponsorship services. This is to be noted that the GST Council has introduced significant amendments to the Reverse Charge Mechanism (RCM) under Notification No. 13/2017 of Central Tax (Rate), including Entry No. 4. These changes are effective from 16 January 2025 through Notification No. 07/2025 – Central Tax (Rate) dated 16th Jan,2025.
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Applicability of RCM for sponsorship services
| Sl. No. | Category of Supply of Services | Supplier of service |
Recipient of Service |
| 4. | (Effective till 15th January 2025)- As per Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017-
–Services provided by way of sponsorship to any body corporate or partnership firm |
Any person | Any body corporate or partnership firm located in the taxable territory. |
| (Effective from 16th January 2025) – Notification No. 07/2025 – Central Tax (Rate) dated 16th Jan,2025 –Services provided by way of sponsorship to any body corporate or partnership firm | Any person other than a body corporate | Any body corporate or partnership firm located in the taxable territory. |
Exemption from sponsorship of specified sporting events
Entry No 53 of Notification 12/2017 – Central Tax (Rate) dated 28th June,2017;
Services by way of sponsorship of sporting events organised –
- by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, State, zone or Country;
- by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;
- by the Central Civil Services Cultural and Sports Board;
- as part of national games, by the Indian Olympic Association; or
- under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
Impact of changes on GST on Sponsorship Services from 16th January,2025
Below table will help us to understand the impact of changes from 16th January,2025 –
| Sl. No. | Service Provider (Organisor of Event) | Service Receiver | Upto 15th Jan 2025 | From 16th Jan 2025 | ||
| Applicable Charge | Person liable to pay GST | Applicable Charge | Person liable to pay GST | |||
| (i) | As part of national games, by the Indian Olympic Association | Body Corporate/
Partnership Firm or Any other person |
Exempt | Exempt | Exempt | Exempt |
| (ii) | Any person other than Body corporate | Body Corporate /Partnership Firm | RCM | Body Corporate /Partnership Firm | RCM | Body Corporate /Partnership Firm |
| (iii) | Any person other than Body corporate | Other than Body Corporate /Partnership Firm | FCM | Any person other than Body corporate (Service Provider) | FCM | Any person other than Body corporate (Service Provider) |
| (iv) | Body corporate | Body Corporate /Partnership Firm | RCM | Body Corporate /Partnership Firm | FCM | Body corporate (Service Provider) |
Note: The expression “sponsorship” has not been defined under GST law. We may seek guidance from the erstwhile Service Tax law, wherein same was defined under Section 65(99a) of the Finance Act, 1994 as under-
“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.
Sponsorship service is an alternate form of advertisement. However, under sponsorship the consideration is normally paid in return for naming of the event after the sponsor or displaying the sponsoring company’s logo or trading name or giving the sponsor exclusive or priority booking rights.
But it should be noted that normal advertising is not covered within ambit of reverse charge mechanism.
Sponsorship Vs Donations or gifts –
Donations or gifts – Circular No. 116/35/2019-GST dated 11th October 2019 provides that donations or gifts given shall not be considered advertisements and not taxable under GST. There should be no reference to or mention of any business activity of the donor that otherwise would have been advertised. Thus, three conditions are required to be satisfied for the non-leviability of GST, namely:
- The gift or donation is made to a charitable institution.
- The payment has the character of a gift or donation.
- The purpose is charity rather than an advertisement
Some examples of cases where there would be no taxable supply are as follows:-
(a) “Good wishes from Mr. Rajesh” printed underneath a digital blackboard donated by Mr. Rajesh to a charitable Yoga institution.
(b) “Donated by Smt. Malati Devi in the memory of her father” written on the door or floor of a room or any part of a temple complex which was constructed from such donation.
Sponsorship Vs Advertisement –
The differentiation lies in the object of the contract,
Advertisement – if the payee offers publicity and the payee contributes directly and inextricably to publicity as the purpose of the payment.
Sponsorship – if publicity is incidental and the purpose of the payment is to defray costs incurred or expected to be incurred by the payee, then it would be sponsorship.
Advertisement falls under FCM while sponsorship typically falls under RCM.
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Disclaimer: The views expressed are strictly personal and based on the position of the law prevailing as of date. This cannot be regarded as an opinion.
In case of any query/suggestion, please reach out to me at caakshayjain48@gmail.com.
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Excellent Article