India's sports sector is rapidly expanding, with numerous government and private entities organizing diverse events like the Indian Premier League (IPL) and Pro Kabaddi League (PKL). These organizations generate revenue from participation fees, sponsorships, and ticket sales. This article examines the Goods and Services Tax (GST) ramifications associated with these income streams.

Understanding the Scope of Supply

The term 'supply' under GST encompasses various transactions, including sales, transfers, barters, exchanges, licenses, leases, or disposals conducted for a business consideration. Participation fees, collected from players for event entry, are subject to GST because the sports body offers services such as match organization, scorekeeping, and winner declarations. Sponsorship fees, paid by businesses for franchise ownership, team acquisition, or promotional support, also fall under GST. When a business procures a franchise or team, GST applies to the bid amount. For sponsorships, the business entity providing the sponsorship is obligated to pay GST under the reverse charge mechanism. Ticket sales to spectators attending matches are also subject to GST, which is levied on the base ticket price and any supplementary services, such as valet parking.

Applicable Tax Rates and HSN Codes

Ticket sales for sporting events incur an 18% GST, categorized under HSN code 998554, when organized by a recognized government sports authority like the BCCI or the All India Football Federation. Private organizations, however, are subject to a 28% GST rate on ticket sales. Sponsorship fees for brand promotion are taxed at 18% GST, falling under HSN code 998397. Similarly, participation fees are also subject to an 18% GST, classified under HSN code 9983.

GST Schemes for Small Taxpayers

Small taxpayers can opt for the composition scheme. This scheme is open to manufacturers or traders with an annual turnover up to Rs. 1.5 crore and service providers with a turnover not exceeding Rs. 75 lakhs. It offers an optional, simplified GST compliance process with significantly lower tax rates (e.g., 1% for manufacturers/traders, 6% for service providers) compared to standard GST rates. A key drawback, however, is that businesses under this scheme cannot claim input tax credit (ITC) on their operational expenses.

Utilizing Input Tax Credit

To ensure seamless event execution, sports organizations incur numerous costs, such as those for advertising, promotions, sports equipment, security personnel, ground upkeep, and payments to officials like umpires and commentators. As these expenditures are directly related to business operations, sports bodies can leverage the input tax credit to offset their GST obligations, provided they have not chosen the composition scheme.

Key Exemptions Under GST

Certain GST exemptions apply to sports organizations:

• Charitable entities, registered under Section 12AA of the Income Tax Act, are exempt when providing training or coaching services in recreational activities related to arts, culture, or sports.
• Sponsorships for sporting events are exempt if the events are organized by specific bodies, including:
  • A national sports federation or its affiliates.
  • The Association of Indian Universities, Inter-University Sports Board, or School Games Federation of India.
  • The Central Civil Services Cultural and Sport Board.
  • The Indian Olympic Association.
  • The Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
• Services rendered to 'recognized' sports bodies are also exempt. These include services provided by:
  • Individuals such as players, referees, umpires, or coaches participating in events organized by 'recognized' sports bodies.
  • Other 'recognized' sports bodies themselves.

'Recognized' sports bodies typically refer to organizations like the Indian Olympic Association, Sports Authority of India, and the International Olympic Association.