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You can collect service tax on sale
July, 22nd 2010

We are producing and organising a commercial event like a fashion show or a beauty contest, we plan to sell the commercial rights to a TV channel for a live telecast. Are we liable to collect service tax on the amount received by us from the channel?

With effect from July 1, 2010, a new service has been introduced in which the definition of taxable service is as follows: Service provided to any person, by any other person, by granting the right or by permitting commercial use or exploitation of any event including an event relating to art, entertainment, business, sports or marriage organised by such other person Section 65(105)(zzzzr).

Cbec vide circular letter D.O.F. No. 334/1/2010-TRU, dated February 27, 2010, described the scope of taxable services as under:

Like intellectual property rights there are certain personal rights such as, right to privacy, easement right, and right to secrecy.

With expansion in the field of information technology and broadcasting sector, many individuals or organisations offer to share/ part with these rights for a consideration.

A corporate sponsored cricket match or company sponsored music concert; film award events; celebrities marriages; beauty contests are some of such private functions, which a large number of viewers like to see on TV or media.

In such cases, companies, broadcasting agencies and video producers are given right to capture these events or programmes for their commercial exploitation in future. Often such commercial exploitation results in provision of another taxable service such as broadcasting service or programme production service.

The proposed service now seeks to tax the amount received by the person or organisation, who permits the recording and broadcasting of the event from the broadcaster, or any other person, who seeks to commercially exploit the event. In many cases, the credit of the tax paid would be available to the receiver of the service.

Since you are organising a beauty contest and plan to sell the commercial rights, you will be liable to collect service tax on the amount received by you from the television channel for the telecast rights under this category.

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