New Delhi: The Board of Control for Cricket in India (BCCI) may soon have to shell out 10% service tax on revenue generated from its cash-rich Indian Premier League (IPL).
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According to Finance Bill 2010, service tax will be imposed on “service of permitting commercial use or exploitation of any event organized by a person or organization”.
A senior finance ministry official told Mint that commercial sporting events would come under its purview. Although he did not give details on which sports tournaments would be covered, he confirmed that IPL would qualify as a commercial event.
The official, who did not wish to be identified, further added that the government could expect to generate about Rs150 crore in taxes from cricket alone.
If IPL’s nearly Rs800 crore revenue for 2009 is anything to go by, the income-tax department could depend on the tournament for more than 50% of its collections from cricket.
In addition, the Union Budget also seeks to levy taxes on sponsorship revenues, which were until now excluded from service tax. The document states: “In the definition of ‘Sponsorship Service’, the exclusion relating to sponsorship pertaining to sports is being removed.”
Sports experts believe the government’s decision to levy tax on sponsorship revenues, though still hazy, makes sense for billion-dollar tournaments such as IPL. “When the government says ‘sports sponsorship’, what they really mean is cricket because if it’s sport-by-sport they will end up crippling sports in India if they tax table tennis, hockey and other such sports which have no money, so the government needs to make a distinction,” said Boria Majumdar, author and sports historian. “Having said that, I think the government decision to impose tax on sports sponsorship is a fair call for cricket because events like IPL makes billions in sponsorship revenues and each step is commercial, yet BCCI is a registered society. So it is only fair.”
BCCI, however, remained unperturbed.
“It is a matter of opinion on what a commercial sporting event is,” said M.P. Pandove, treasurer, BCCI. “I have not had a chance to go through the details of the Budget, but until we get more clarity on what ‘commercial’, stands for, I will not be able to comment on this issue further.”
The Union Budget proposal comes just three days after the government withdrew tax relief for BCCI, the richest cricket body in the world, which has managed to stay away from the tax ambit by positioning itself as a “charitable organization”.
“We have taken into consideration the government’s decision to view BCCI as a commercial entity but we will still contest it,” added Pandove.