Not just the hoopla, India stands to lose tax moolah as well with the Indian Premier League (IPL) shifting to South Africa. While the largest loss would be in service tax on broadcasting rights, advertising and branding, the Central Borad of Direct Taxes expects to lose only Rs 20 crore as income tax.
Officials from the Central Board of Excise & Customs said that the lone service tax earning would be from Board of Cricket Control in India (BCCI) on the franchise fee it charges the team sponsors and the purchase fees it pays to players.
At 10 percent, team owners would have to pay $72.36 million and the BCCI would have to shell out $7.45 million (Rs 372.5 crore) as service tax under business auxiliary service. The purchase fees paid to players would also be liable to service tax under BAS.
But what would escape the CBEC dragnet is service tax on broadcasting rights that will this year be earned by South Africa. Unlike last year, their sale of time slots for ads to Indian companies would also not attract the 10.3 percent service tax, officials said.
The display of DLF logo on Cricket stumps or the sidescreen or the Kingfisher banners on the ground would also not qualify for service tax as these services would not have been provided in the Indian territory, CBEC official said.
However, Indian players would have to pay 10 percent of their earning as income tax deductible at source (TDS) under Section 194J of the Income Tax Act while their foreign colleagues would escape paying tax here as Section 194E of the Act taxes non-residents only on income earned from any participation of any game, sport or advertisement or product endorsement in India.
A CBDT official said that after a study of the rules today it was realized that there was no provision to tax players or professionals who were not Indian residents. However, that loss is estimated at Rs 15-20 crores considering last years earnings, he said.
The Government earned Rs 91 crore as TDS from IPL last year on payments made to players, umpires, coaches, commentators and other professionals associated with the tournament.
Initially, some paid 2 per cent of their fees for rendering professional and technical services but in August last year, CBDT clarified that all sportspersons and associated professionals as well as sports associations must be levied TDS at 10 per cent.