Complementary Indian Premier League (IPL) tickets given or gifted to anyone free of cost would still attract Goods and Services Tax (GST) as there is a consideration involved even if it may not be monetary, a recent ruling by Appellate Authority of Advance Ruling (AAAR) said.
This would mean that any IPL franchise owner gifting complimentary tickets to its employees will have to cough up GST on the value.
KPH Dream Cricket Private Ltd, which operates an IPL cricket team under the title Punjab Kings, had approached the Punjab bench of AAAR for clarity on the matter.
The Punjab team wanted clarity on whether free or complementary IPL tickets are taxable and if an input tax credit can be claimed on that. An input tax credit is a mechanism under GST where part of the tax paid can be set off against future tax liability.
"Even for the consideration in the form of payment in kind, it should not be vague or illusory and there should be an element of reciprocity - the argument by the appellant (Punjab Kings) that on account of absence of consideration in such activity or transaction, the same should not fall within the territory of supply is accepted and therefore it is held that the activity of providing such free or complimentary tickets is not a supply as per the GST Act," the AAAR ruled.
Multinationals also, at times, do team events where they take their teams for free matches.
This ruling is also set to impact such events and transactions, say tax experts.
"Many companies, as part of team events and activities, take their employees to watch sporting events such as the IPL and the World Cup. Taking cognizance of this ruling, one would need to examine the GST implications of all such activities," said Harpreet Singh, indirect tax partner at KPMG in India.
The company had first approached the Authority for Advance Ruling (AAR) for clarity. AAR had held that any activity of providing complimentary tickets without any consideration would be considered a supply of services and the appellant would be eligible for an input tax credit in respect of complimentary tickets.
The company had filed an appeal with AAAR soon after.
The AAAR said that there is always a consideration involved, especially when such favours are done to "related persons." That is, people with whom the company has a relationship (employees) or who may provide some benefit to the company in the future.
"Under GST laws, as employer and employee are related parties, transactions without consideration could also be liable to GST, unless the same are in the course of employment," said Singh.
"The appellant would not be eligible to avail input tax credit in relation to such activity, however, where such activity or transaction is treated as a supply on account of being provided by the appellant to a related person or a distinct person, the appellant would be entitled to avail input tax credit for the same," the AAAR ruled in June.