As per section 65(105)(zzzn) of Finance Act, 1994, as amended from time to time, ‘Taxable Service’ means any service provided or to be provided to any person, by any other person receiving sponsorship, in relation to such sponsorship, in any manner.
Sponsorship service was first introduced w.e.f. 01.05.2006. Sponsorship service is defined under Section 65(99a) of the Finance Act, 1994 as “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 a taxable service and it is enumerated in serial number 3 of reverse charge notification no.30/2012. Full service tax shall be paid by any person liable for paying service tax other than the service provider in respect of services provided or agreed to be provided by way of sponsorship.
Sponsorship service is an alternate form of advertisement. 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. The service tax is leviable only when the sponsorer is a body corporate or partnership firm. The service tax is to be collected under reverse charge method from the recipient of service namely the body corporate or partnership firm who sponsors the event.
As per mega exemption notification no. 25/2012, services by way of sponsorship of sporting events is exempted if it is organized by,-
(a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state, zone or Country;
(b) 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;
(c) by Central Civil Services Cultural and Sports Board;
(d) as part of national games, by Indian Olympic Association; or
(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;
The Service tax liability shall be paid by service receiver in cash as CENVAT credit facility is not available to meet out the liability under reverse charge mechanism. The entire service tax is payable by service receiver. If the receiver of the service is not body corporate or partnership firm or if such body corporate or partnership firm is not located in taxable territory, the service provider i.e. the person receiving the sponsorship money will be liable to pay service tax.
(The above article is authored by Ganeshan Kalyani and he can be reached via email on firstname.lastname@example.org. This article is for academy purpose only)