Whether sponsorship expenses shown in Financial account attracts Service Tax.

[samiuddin ansari]

Sir,

One more query is required to clarified as to whether sponsorship expenses shown by any firm in their Financial account attracts service tax liability. However, it has been shown in the firm's expense side incurred owing to fees and other relevant expenses for education purpose of children i.e family members admitted in the foreign university. Solicit your necessary valuable guidance on the matter with supportive case laws, circulars, instructions etc. by Board, if any.

AI Summary

Reverse charge on sponsorship services: recipient liable for service tax even if the expense is non-business.
Sponsorship services are subject to the Reverse Charge Mechanism and when a firm records sponsorship expenses, the firm as recipient-including a private limited company as a body corporate-is liable to pay service tax. Non-use of the service in the recipient's taxable output does not remove the RCM incidence, and the element of consideration is treated as present. If the sponsorship is not an output service under the Cenvat Credit Rules, the recipient generally cannot claim Cenvat credit against that tax.