SPONSORSHIP SERVICES

[Mr. M. GOVINDARAJAN]

            The 'sponsorship services' were brought under service tax with effect from 01.05.2006. Body corporate or firms involved in business or commerce sponsor events with intent to obtain commercial benefit of bringing their name or products or services in public image to public attention by associating with a popular or successful event. This is an alternate form of advertisement. Consideration is normally paid in return for naming of the event after sponsor or displaying the sponsoring company's logo or trading name or giving the sponsor exclusive or priority booking rights. Service tax is leviable only when the sponsor is any body corporate or firm. Sponsorship of sports events is excluded from the levy. The organizers of the events are not liable to pay service tax under sponsorship service.

            Section 65(99a) of the Finance Act, 1994 ('Act' for short) gives the meaning of the term 'sponsorship'. Sponsorship includes-

Naming of 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 gift given by the donors subject to the condition that the service provider is under an obligation to providing anything in return to such action.

            Section 65(105)(zzzn) of the Act defines taxable service in respect of sponsorship services as any service provided or to be provided to any body corporate or firm, by any person receiving sponsorship, in relation to such sponsorship, in any manner, but does not include services in relation to sponsorship of sports events.

            Rule 2(1)(d)(vii) of Service Tax Rules, 1994 provides that the person liable for paying service tax in relation to sponsorship provided any body corporate or firm located in India, the body corporate or, as the case may be, the firm who receives such sponsorship services.

            In regard to sponsorship service and business auxiliary service provided by the Indian Cricket League and India Premier League, the department issued lr. NO. Dy.No. 42/Comm (ST)/2008, dated 08.02.2008. The activities of the cricket leagues involve sponsorships of the participating teams/matches and other activities such as providing broadcasting rights, sales promotion etc., The film stars and big business houses have participated in such biddings and the bid amounts are substantial.

            In such cases the full facts about the nature of contract, the quantum and types of monetary arrangements is to be got verified immediately and examined whether such monetary transaction are providing taxable services i.e., sponsorship service, broadcasting services, event management, business auxiliary services etc.,  Services in relation to sports events are out of the purview of sponsorship services, the sponsorship of a cricket team per se may not be outside the scope of this taxable service. Further if a team or a player also acts as a brand ambassador for a corporate it may fall under the category of business auxiliary service.