Complimentary IPL tickets will attract GST, rules AAR

Complimentary tickets for Indian Premier League (IPL) matches will attract GST, said the Authority for Advance Rulings (AAR) of Punjab in a matter involving franchisee Kings XI Punjab and GST authorities.

The AAR helps the taxpayer by giving an advance decision in relation to the supply of goods and/or services proposed to be undertaken or being undertaken by the assesses. The decision is binding on the applicant and the jurisdictional tax authority. Though such a decision does not have precedent value like that of a high court or Supreme Court judgment, it can be used as a persuasive tool in future cases. Therefore, this decision also can be used for persuasion in matters related to the supply of complimentary tickets by other franchisees and also in other sporting events.

Enormous implication

Commenting on the decision, Anita Rastogi, Indirect Tax Partner at PwC, said it is a very interesting interpretation of the expressions ‘consideration’ and ‘supply’, leading to the conclusion that complimentary tickets to unrelated parties is taxable under GST. This ruling has enormous implication across sectors, she observed.

“The intention of the GST law is not to make free supplies taxable in case of unrelated parties. Hence, it is crucial that immediate clarification be issued by the authorities to ensure that this matter is resolved urgently,” she said

Just before the beginning of the 11th season of IPL (April 7-May 27, 2018), the owner of Kings XI Punjab, KPH Dream Cricket Pvt Ltd, approached AAR-Punjab. It sought answers to whether ‘complimentary tickets’ fall within the definition of supply under CGST Act 2007, and thus, whether the applicant is required to pay GST on such free tickets; and also whether the applicant is eligible to claim input tax credit (ITC) in respect of complimentary tickets in this regard.

The franchise submitted that while the term ‘free supply’ is not defined under GST, it suggests a supply of goods and services without any consideration (monetary or in kind). Also, free supply of goods and services did not attract indirect taxes such as VAT, Central sales tax and service tax in the pre-GST regime, it pointed out.

Different treatment

Under the GST regime, free supplies made to related and unrelated parties are treated differently.

Though GST is designed to treat goods and services alike, provisions relating to credit of free supplies of goods differ from those of services.

In August, the applicant sought to withdraw the petition. It cited a clarification issued by Central Board of Indirect Taxes and Custom (CBIC), which said that moulds and dies owned by the original equipment manufacturers (OEM) provided to a component manufacturer (the two are not related) for free do not constitute a supply, as there is no consideration involved and this has been done in the course or furtherance of business. Accordingly, it said, there is no requirement for reversal of input tax credit availed.

AAR sought comment from the tax official, who said GST is to be levied, and input tax credit can be claimed. Taking cognizance of this view and considering the existing provisions, AAR said a withdrawal cannot be allowed in public interest. It also said the supply of dyes and moulds cannot be compared with IPL tickets. After a detailed hearing, it made it clear that providing complimentary tickets would be considered a supply of service and hence attract GST. It also made it clear the applicant would be eligible for ITC.

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