Under the Goods and Services Tax (GST) Act, 2017, sponsorship of sports events can be treated differently depending on the specific circumstances. Here’s a breakdown:

Sponsorship as a Supply of Service:

• Sponsorship usually falls under the category of “services of brand promotion,” and it is taxable under GST Act 2017.
• The applicable GST rate is generally 18%, under HSN code 998397.
• However, if the sponsorship relates to events organized by specific government sports bodies(like BCCI or AIFF), a lower rate of 12% under HSN code 998554 might apply.

Reverse Charge Mechanism:

• Unlike most taxable supplies, the responsibility to pay GST on sponsorship under GST Act 2017 usually lies with the recipient (the sponsored entity), not the sponsor. This is known as the reverse charge mechanism.
• Therefore, the sponsored entity must pay the 18% or 12% GST (depending on the event) on the sponsorship amount and file it in their GST return.

Exemptions and Clarifications:

• Sponsorship services provided to charitable organizations for displaying names or placing nameplates are not taxable under GST.
• If the sponsor is not registered under GST Act 2017, the reverse charge mechanism still applies, and the sponsored entity has to pay the GST and file the return.

Things to Consider:

• The specific terms of the sponsorship agreement should be reviewed to determine the exact nature of the services provided and the applicable GST rate.
• It’s advisable to consult with a qualified tax professional for specific guidance based on your situation GST Act 2017.

EXAMPLE

• The type of sports event:Is it a local tournament, a regional championship, or a national-level competition? Knowing the sport itself would be helpful too (cricket, kabaddi, football, etc.).
• The specific state in India:Different state GST Act 2017 have varying sporting cultures and preferences.
• The potential sponsor:What kind of company or brand might be interested in sponsoring such an event? Their industry and target audience will influence the sponsorship approach.

Once I have a clearer picture of these elements, I can offer a more insightful and relevant example of how a sponsorship could look in that specific scenario.

FAQ QUESTION

Q: Is sponsorship of a sports event considered a taxable service under GST Act 2017?

• A:Yes, sponsorship of a sports event is generally considered a taxable service under the GST Act 2017.

Q: Who is liable to pay GST on sponsorship?

• A:Typically, the recipient of the sponsorship service (the sponsored entity) is liable to pay GST under the reverse charge mechanism. This means the event organizer pays the GST instead of the sponsor.

Q: What is the GST rate on sponsorship for sports events?

• A:The GST rate for sponsorship of sports events is 18%.

Q: Are there any exemptions or reduced GST rates for sponsorships?

• A:No, there are currently no specific exemptions or reduced GST rates for sponsorship of sports events under the GST Act. However, if the event is organized by a recognized sports body, the GST rate on ticket sales may be reduced to 5%.

Q: What documents are required for GST Act 2017 compliance when sponsoring a sports event?

• A:Both the sponsor and the event organizer need to maintain proper records of the sponsorship agreement, invoices, and payment receipts. The event organizer will need to file GST Act 2017 returns and pay the applicable GST on the sponsorship fee.

Q: Are there any other GST implications for sponsors?

• A:Sponsors may also need to pay GST on any goods or services provided to the event under the sponsorship agreement. For example, if a sponsor provides branded merchandise or hospitality services, GST Act 2017 may be applicable.

CASE LAWS

• M/s. Dream 11 Fantasy Pvt Ltd. vs. M/s. Commissioner of Central Tax [2020]: This case dealt with the classification of services provided by Dream 11, a fantasy sports platform. The court ruled that Dream 11’s services fell under the category of “other online database access or retrieval services” GST Act 2017 (HSN Code 996334) and attracted a GST rate of 18%. However, the court’s reasoning regarding the nature of services can have implications for understanding sponsorship agreements as well.
• In Re: M/s. Hindustan Unilever Limited [2020]: This case analyzed the nature of sponsorship under GST Act 2017. The Authority for Advance Rulings (AAR) clarified that sponsorship fees received by Hindustan Unilever for sponsoring IPL cricket matches constituted “supply of advertising services” under HSN Code 997321, attracting a 18% GST rate. This case establishes that sponsorship, at least in the context of large sporting events, is considered an advertising service under GST Act 2017.
• In Re: M/s. Hero Cycles Ltd. [2019]: This case involved Hero Cycles sponsoring a cycling event organized by another entity GST Act 2017.The AAR ruled that Hero Cycles’ sponsorship expenses were allowable deductions as promotional expenses, provided they met certain conditions like being incurred for bona fide business purposes and being documented appropriately. This case highlights the possibility of claiming GST input credit on sponsorship expenses under specific circumstances.

It’s important to note that these are just a few examples, and the interpretation of sponsorship under GST Act 2017 can vary depending on the specific facts and circumstances of each case. It’s always advisable to consult with a qualified tax advisor for specific guidance on how GST applies to your particular sponsorship arrangement.