The Commissiorate of Service Tax, Delhi, has slapped notices on official partners and sponsors of the tournament, including Hero Honda Motors and Jaiprakash Associates, asking them to show cause as to why service tax amounting to around Rs 6 crore should not be recovered from them for providing sponsorships.
Two notices were issued to Hero Honda seeking to recover Rs 4 crore in tax. A third notice was served on Jaiprakash Associates for allegedly an amount of Rs 1.85 crore.
Service tax is not chargeable on sponsoring sports events. However, these companies are sponsoring IPL teams (and not sports events). So they are bound to pay the tax, said a department official.
Hero Honda has the sponsorship rights of Delhi’s Daredevils, while Jaiprakash Associates was a sponsor of the Deccan Chargers team.
Another notice is being issued to DLF Ltd, which paid Rs 40 crore to BCCI for becoming the title sponsor of the IPL-T20 tournament. The Tax Department is expected to demand around Rs 5 crore from DLF.
The Department is also in the process of issuing notices to M/s GMR Sports and United Breweries, besides host of other companies, directing them to pay service tax on account of sponsoring IPL matches, sources said. Some companies like Adidas and Religare have already paid
Rs. 10 lakhs and Rs 24 lakhs respectively for sponsoring the Delhi Daredevils.
BCCI earned around Rs 200 crore from the first IPL season by using media rights of the matches, franchisee rights of the teams and title sponsorship.