The termination of the Indian Premier Leagues Sony contract has meant that Indian government may lose Rs 1,000 crore in tax through a scheme of complex tax structures using tax havens. CNBC-TV18s Haresh Soneji and Ashwin Mohan report.
The taxman is at the losing end at the IPL. The new contract between BCCI and WSG Mauritius and subsequent contract with broadcasters via tax haven Mauritius means tax incidence is limited to what the BCCI might have to pay over the next nine years.
Says Lalit Modi, Chairman and Commissioner, IPL, Rights et cetera even they were being transferred out, they even tried from WSG earlier were moved out to WSG India to Sony Singapore. It is not a tax loss inwards at all because the Indian government charges you with holding tax one way or the other. This was done more as a legal strategy than anything else.
But, the nearly USD 1.6 billion plus rights deal for the next nine years between WSG Mauritius and the broadcaster will escape the taxman's net.
Earlier WSG India would have paid for consideration received from the broadcaster. The well-organised chaos around IPL seems to have smartly managed the tax obligation. There is little clarity from several industry and international tax experts and media buyers and even Lalit Modi chose not to explain "I would not like to explain that part," he said.
The Board of Control for Cricket in Indias (BCCI) contracted revenues in IPL 2 will be up 20% to nearly Rs 11,000 cr.
Other modes of revenues include sponsorships, entertainment tax, stadium collections and on-ground advertisements. The government stands to lose nearly Rs 1,300 crore on account of service tax alone.
On advertising and other contracts deliverable abroad, transfer pricing and transactions at arms-length pricing basis will keep a significant chunk of revenues away from India. Thus, states are expected to lose out Rs 1,000 crore in tax.