Tax burden on corporate sponsorships eased
Live MintNew Delhi: The Goods and Services Tax Council’s decision on Saturday to tweak a rule on corporate sponsorships is set to make these deals more tax efficient and the recipient of funds better off, officials and experts said. The Council’s decision to shift the onus of remitting tax on sponsorship deals from the donor—that is, the entity that receives the benefits of a sponsorship deal in terms of brand promotion and access to target audience etc., to the entity that offers it for a price, for example, a sports event organizer—is set to enable the latter to lower its overall tax liability, they said. “Under existing rules, corporate sponsorship deals for which the sponsor is liable to make tax payments under the reverse charge mechanism, is considered as tax exempt in the hands of the “It eliminates complexities of the reverse charge mechanism, ensuring seamless input tax credit for recipients and giving providers greater control over tax reporting,” said Sehgal. Providers such as event organisers face increased compliance responsibilities, including timely filings and accurate invoicing, while recipients--the sponsors, must now verify that GST has been correctly paid by the supplier and ensure it reflects in form GSTR-2B to claim input tax credit by the sponsor, explained Sehgal.