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 Tax and transparencya

BCCI coughs up Rs 36 crore as tax on IPL revenues
August, 09th 2008

The Board of Control for Cricket in India (BCCI) has coughed up Rs 36 crore as service tax on revenues earned from eight franchisees in the Indian Premier League (IPL). The tax was paid on Wednesday in the wake of an investigation started by the tax authorities.

A tax official said BCCI might have made about Rs 500 crore from the cricket carnival and its service tax liability, at 12.36 per cent, could be up to Rs 60 crore. The amount BCCI is believed to have paid in cash is Rs 29 crore, after the deduction of Cenvat credit.

B Ravichandran, service tax commissioner at Mumbai, said that the investigation was in the final stages and some payments had been made.

Lalit Modi, chairman and commissioner, IPL, declined to comment on the issue.

In the IPL scheme, a franchisee owns the right to the use players in the matches. The finance ministry had amended the definition of 'franchise' in 2005 to ensure service tax compliance in franchise arrangements.

It is an agreement by which the franchiser grants rights to the franchisee to sell or manufacture goods or provide a service or undertake any process identified with the franchiser, by any symbol such as trademark, service mark, trade name or logo. IPL had four revenue streams last season - sale of media rights, title sponsorship, amounts bid by the franchisees and revenues generated by the franchisee rights.

Of the proceeds from the media rights, IPL kept 20 per cent, gave out 8 per cent as prize money and distributed the rest among the franchisees. The title sponsorship and other revenues were reportedly shared between IPL, the franchisees and as prize money in the ratio of 40:54:6. Also, BCCI is believed to have received 20 per cent of the revenues from the franchisee rights.

Parallel to the service tax investigation, a panel is also looking at the income-tax taxability of BCCI. Whether to treat IPL as a commercial venture (which is taxable) or a charitable activity (which is tax exempted) is still in debate. Till March 31 this year, the tax department collected over Rs 60 crore as TDS from various stakeholders in IPL.

 
 
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