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Wednesday, April 10, 2013

BCCI or Individuals - but pay the Service tax to Govt

The indemnity in Insurance Policy gets more complicated with the incidence of Service tax and more of the adjustment of input credit.  Service tax is part of Central Excise; we all pay in at one point or other ~ you pay that bit extra when paying your telephone bill ~ even restaurants charge you… infact hotels and restaurants charge us VAT as also Service tax.. ! ~ the service provider pays it to the Govt of India but collects it from his customers, thus raising the prices…….. there is CESTAT - the Customs, Excise and Service Tax Appellate Tribunal; earlier known as CEGAT. 

Had earlier posted about Pathan brothers being served notice for payment of service tax by Central Excise & Customs, Vadodara.  The Tribunal there had held that the fees paid to the players by the IPL franchises would be within the purview of service tax and there is liability.  It was held that it would  be under the service category of "Business Support Service" on the ground that appellants wear the team clothing which bear the brand/marks of various sponsors and they are also required to participate in promotional/public events of the franchisee. According to reports, Irfan had a higher demand of Rs.1.21 crores while that of Yusuf was much lower at Rs.65.50 lakhs. The Commissioner of Central Excise, Vadodara had reportedly imposed equivalent penalty and also interest and that the matter went up before the appellate tribunal called - CESTAT. The CESTAT took up both the appeals together not because they are brothers but because they were fighting a similar battle.

Now Daily Mail reports that Board of Cricket Control is undecided whether it will pay Service tax on behalf of cricketers.  The IPL 6 is on, largely low-scoring matches, but for that 200+ by MI yesterday ~ nail-baiting finishes though…….the report at this juncture is that BCCI is undecided on paying the 12.36 per cent service tax in addition to the match fee of players. The IPL window has swelled the coffers of BCCI as also most players.  It is reported that recently,  BCCI service tax consultants held a workshop for north and central zone state associations at the Ferozeshah Kotla and BCCI’s treasurer is quoted as stating that the world's richest cricket body was still undecided on whether to pay the service tax on behalf of players' match fee and their share of annual BCCI profit.

Ideally - and as per normal practice - the BCCI should be paying service tax on behalf of cricketers, besides the match fee, much like consumers pay excise duty and VAT etc. in addition to the cost of any product.  The service tax for sportspersons came into effect on July 1 last year. Shirke emphasised that the BCCI would indeed abide by the law of the land. Though BCCI is undecided on whether they will foot the ST bill on behalf of cricketers, Shirke told that the Board would indeed pay the tax.  He quoted a technical requirement that for payment of Service tax, the players will have to the first registered with relevant tax authorities.  The report puts it that the BCCI itself has been paying service tax. As per its records, the Board, as on March 31, 2012, accounted for Rs 25.30 crore as service tax on input services it had received. And as on March 31, 2011, it was Rs 7.69 crore. The BCCI shares with players 26 per cent of its total profit every year. For the year ending March 31, 2012, the Board shared Rs  47.49 crore of its profit with the players. Besides, BCCI pays players for representing India as well as their state teams that compete in various domestic tournaments. During a home series, a player gets Rs 7 lakh for a five-day Test match, Rs 4 lakh for an ODI, and Rs 2 lakh for a Twenty20 International. For overseas tours, players are paid a lump sum amount. A player appearing for his state gets Rs 10,000 per match day.

The Board also awards central contracts to top players on an annual basis. A total of 37 players given contracts in October last year in Grade A (9 players are getting Rs 1 crore each), Grade B (8 are getting Rs 50 lakh each) and Grade C (20 are getting Rs 25 lakh each). A tax consultant is quoted as saying - "Any income which is not a salary or is not towards sale of a product, service tax will be levied on it."  After being extended a few times following representations to the government, the deadline for paying service tax for the first quarter - July to September 2012 - was extended and now it has been set as April 25. Before last year, service tax was applicable on only those services that were specified under the Finance Act 1994. Services by sports-persons were not a specified service, so didn't have to pay this tax. Last year, the government replaced the 'positive list' with a 'negative list' to remove confusion.

The newsitem also states that the Indian Captain Mahendra Singh Dhoni and legend Sachin Tendulkar could end up forking the most amount as service tax.

With regards – S. Sampathkumar
10th April 2013.

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