Home >politics >policy >BCCI’s service tax battles

Mumbai: The basis of the Board of Control for Cricket in India’s (BCCI’s) financial clout is simple—India’s fascination for cricket in general and the stars of the game in particular. About 135 million tuned in to watch the World Cup 2011 final, according to TAM Peoplemeter data. That translates into significant income from the sale of media rights for the board.

The latest sale was made to Rupert Murdoch-owned Star TV, which paid 3,851 crore for broadcasting 96 matches in 2012-18. That’s about 40 crore per match, a 23% jump over the previous agreement with Nimbus Communications. Media rights income typically accounted for about half of BCCI’s revenue in the last five years since 2007-08.

It is over this particular category that most of BCCI’s service tax battles are centred. Since October 2005, the service tax department has sent nine notices to BCCI (for all matches including IPL) raising a tax demand of 444 crore on the sales of media rights, royalty income and sponsorship income, according to the 2010-11 annual report of the board. The service tax department has demanded these taxes under the different sections of advertisement agency services, intellectual property rights services and franchisee services.

The board has contested these demands, and at least on this front, finds itself like Virender Sehwag facing medium pacers on a dead pitch. In a March 2012 letter to the Central Board of Excise and Customs (CBEC), the service tax department conceded that these services cannot be classified under intellectual property rights or franchisee services. That’s because after July 2010, these kinds of transactions were classified under “commercial use of exploitation of event service" following a clarification in that year’s Union Budget. These tax demands are under adjudication and no reply has been received from CBEC, said a service tax official.

Secondly, the tax department has sent another four demand notices totalling 140.7 crore relating to production services provided by the board between 2004 and 2010. These too have been contested by the board although it has subsequently started paying the tax for these services “under protest" since September 2010.

Thirdly, the department decided to conduct an audit of BCCI’s auctions to see if any transactions slipped through their net. According to audit documents reviewed by Mint, the exercise revealed that BCCI had to pay service tax for a variety of other transactions such as hosting World Cup matches, paying subscription fees to the International Cricket Council, receiving sponsorship income from the Sahara group (which was not part of the show-cause notices sent earlier). The audit, which concluded in February 2012, raised a fresh service tax demand of about 59 crore, of which the board has paid 11 crore till January, said the official quoted earlier.

Thus, the total service tax liability of the BCCI is at least 209.7 crore.

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