GST on Sponsorship Services

Basics of Sponsorship Service:-

Who is the Service Provider and who is Service Receiver:-

Suppose BCCI hosts a event for India Sri Lanka ODI Series and Reliance Sponsors the Event i.e there are hoardings of reliance everywhere

Solution

Reliance sponsor the Cricket Matches between India and Sri Lanka.

BCCI will be service provider and Reliance will be service receiver.

Defination of Sponsorship:-

Sponsorship has not been defined anywhere in GST Act but that was defined in Service Tax Act

Section 65 (99a) of Service Tax Act

Sponsorship includes:-

(a) naming an event after the sponsor,         

(b) displaying the sponsor’s company logo or trading name,

(c) giving the sponsor exclusive or priority booking rights,

(d) 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.

Analysis of the definition:-

(a) Naming an event after the sponsor (Like DLF While sponsoring IIFA Awards, the speaker introduces the event as DLF IIFA Awards)

Likewise we see DLF IPL.

(b) Displaying the sponsor company’s logo or trading name, Like in Cricket when there is a Match going on and we see Pepsi written at the hoardings all along the ground and on the stumps.

(c) Giving the sponsor exclusive or priority booking rights Like Honey Singh Concert is going on and Red FM Sponsors the above concert and Red FM provide their audience free passes to watch the function.

(d) Sponsoring Prizes or trophies for the Competition, like the Man of the Match will be provided a Car or a Samsung LED Television.

(e) Donations and Gifts are excluded from service tax applicability as  it will be provided as natural love and affection, but if that has been provided with a profit motive in future like  

Suppose if a company bears education costs of Mr X but the person will have to perform managerial functions in the company after completion of his studies. So not covered by exclusion.

It’s an inclusive definition not an exhaustive definition. An exhaustive definition means that no other thing can come beyond its purview. The items listed in the exhaustive definition are only applicable to the subject, whereas in Inclusive definition the area is wide open and resembled cases will come within its purview

Notification No 13/2017 Central Tax Rate has covered this service under reverse charge as per following provisions:-

Therefore reverse charge will be applicable only when Receiver of Service is Body Corporate or Partnership Firm Located in Taxable territory

Suppose if the

Service receiver is located in non taxable territory  then,

 Service provider who is located in taxable territory needs to discharge GST Liability

Thanks

CA Rahul Gupta