GST ON SPORTING EVENTS
Sports events are happening all around the clock where there are many players participate and all the events are backed up with participation fees, membership fees, sponsorships, and prize money. Majority of sports events are conducted by govt organizations like National sports academies, Sports club, Olympic association which avail exemptions on the participation fees and other revenues, parallelly major sports events are conducted by private giants like IPL, PKL by private companies and similar events are conducted by some prestigious clubs like Race clubs, Golf clubs etc. which are taxable under GST. The incidence of GST on all the transactions discussed above is as follows:
GST on participation fees:
Participation fees is related to fees collected from the participants for the purpose of participating in the event or league by the organizations or clubs which are conducting the sports events. The amount collected is used for the purpose of organizing the sports and purchase of materials and other organizing costs. The incidence of GST is as follows:
Section 7 of the CGST Act
“Scope of supply
(1) For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.
Explanation. ––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another
(b) import of services for a consideration whether or not in the course or furtherance of business and;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II,
(2) Notwithstanding anything contained in sub-section (1), –– (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.”
In this case, the club or organization being a taxable person is providing the service of organizing the sports events, arranging for all the sports equipment and materials, conducting matches, recording of scores, conducting of leagues, declaration of scores and winners for the entire events through prescribed and recognized sports procedures for which the consideration is collected as participating fees. Accordingly, GST is applicable on the participation fees collected for the service provided and GST must be collected and paid within the 30 days of receipt or invoice whichever is earlier.
The point of taxation and place of provision of services are accordingly applicable.
GST on sponsorship fees:
In recent era of sports, to increase the participation and interest in the sports events, a new concept of sponsorship, franchise and sale of teams are initiated where the teams are listed in the auction along with the players, and auction will be open for bid. Business organizations which are interested in business promotion and brand promotion shall bid for a higher price than other will purchase the team. The team shall represent the sponsors during the play and promote the business. The amount shall either be taken by the team players or shared between the players and the club.
Other than this general sponsorship by the organizers is also done, where the event can be sponsored by the businesses for the purpose of brand promotion.
In case of purchase of franchise, GST is applicable under forward charge on the franchise fees, bid amount paid.
In case of any sponsorship, GST is applicable under reverse charge as follows:
The services provided by the sponsorship to any corporate body or partnership firm in taxable territory is covered under RCM in GST. Hence, sponsors will discharge GST under reverse charge for the sponsorship services by the originations or clubs.
GST on prize money:
The magnificence of sports events will be treasured once the winners’ teams and runners’ teams are announced along with prize money. Once again, there comes a question on whether GST must be paid on the prize money received, the answer is still under doubt by the department:
If the money is earned someone who is not having GST registration, then GST is not applicable for them. If the person is having GST registration, then GST is applicable.
Initially the GST has been collected by the department on the prize money received. Paradoxically there are some advance rulings stating that GST is not applicable on prize money.
The Maharashtra Appellate Authority of Advance Ruling (AAAR) while rejecting the AAR ruling held that no GST applicable on Prize Money/ stakes in absence of supply. The applicant Vijay B. Shirke is duly registered with the Goods and Service Tax Department. The Applicant owns horses. The horses owned by the applicant participate in races organized at different clubs. The horse races take place at Royal Western India Turf Club (RWITC) located in Mumbai and Pune.
The applicant also participates in horse races held in Mysore Race Club, Bangalore Turf Club, Hyderabad Race Club, Royal Calcutta Turf Club and Madras Race Club. Upon winning such horse races, the applicant is awarded with prize money in respect of horses, which win the race. In the year 2012, when the Service Tax was introduced, Royal Western Turf Club Ltd. (RWITC) Mumbai issued a letter to Western India Race Horse Owners Association Ltd., in which RWITC informed the horse owners that the amount of stake or prize money received by the owners is covered under Service Tax. Accordingly, the applicant paid the service tax at the applicable rate till June 2017. As the definition of service under the Service Tax Act is identical in the GST, the applicant continued to pay the GST.
The applicant sought advance ruling on the issue whether receipt of prize money from horse race conducting entities, in the event horse owned by the applicant wins the race, would amount to ‘supply under section 7 of the Central Goods and Service Tax Act, 2017 or not and consequently, liable to GST or not.
The AAR ruled that the amount of prize money received from the events conducting entities would be covered under ‘supply under section 7 of the CGST Act, 2017 and consequently, it is held as a taxable supply of services and liable to GST at the rate of 18% (9% each of CGST and SGST).
However, the AAAR consisting of Sanjeev Kumar and Rajesh Kumar Sharma while setting aside the AAR’s order held that input tax credit is restricted to the portion of taxable supplies only.
Therefore, the AAAR held that in the present case, the Applicant-Respondent will not be eligible to avail ITC in respect of any input supply including the entry fee, the training charges paid to the horse trainers, and the charges.
Therefore, revenue is yet to provide some clarity in this regard. Also, Income tax TDS u/s.194B is applicable on the prize money earned for the event.
Conclusion:
GST is not so sporty for the sports events, and a better light has to be thrown by the department on some pending issues for a better day in sports.
Author Bio
